Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Current Nike Weakness An Opportunity For Buy-And-Hold Stock Investors

By Investing.com (Haris Anwar/Investing.com)Stock MarketsSep 27, 2021 18:02
au.investing.com/analysis/current-nike-weakness-an-opportunity-for-buyandhold-stock-investors-200487890
Current Nike Weakness An Opportunity For Buy-And-Hold Stock Investors
By Investing.com (Haris Anwar/Investing.com)   |  Sep 27, 2021 18:02
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Shares of sportswear giant, Nike (NYSE:NKE) have been under pressure since last week, after the sportswear giant lowered its sales forecast for the remainder of the year. The Beaverton, Oregon-based footwear and accessories behemoth has been hurt by COVID-19-related supply disruptions, which have been making it difficult for the company to satisfy soaring demand.

NKE Weekly TTM
NKE Weekly TTM

The stock, which this year has been the darling of growth investors, has shed about 7% since Sept. 23, when the company released its fiscal 2022, first quarter earnings, telling investors that factory closures in Vietnam, longer transit times, and labor shortages are hampering sales at the world’s largest athletic-wear company. 

In the fiscal second quarter, Nike sees sales flat to down by low single digits. Analysts had been looking for revenue growth of 12% for the year, as well as a 12% increase for the second quarter, according to Refinitiv data.

This potential slowdown has halted Nike’s powerful 2021 rally, which sent the stock to an all-time high last month. Shares, which closed at $149.59 on Friday, have lost 14% from their peak. This dip, in our view, is a buying opportunity for long-term investors currently sitting on the sidelines. 

Our bullish call on Nike is two-fold. First, the hurdles the company is facing are related to snags in supply; demand for its products remains strong. For perspective, the past quarter produced Nike’s second-highest, three-month revenue figure ever, just behind last quarter’s sales mark. NKE's earnings-per-share figure set a record for the company.

This robust demand trend is likely to continue as the world slowly overcomes the pandemic and more and more countries open their economies. 

Thriving Online Sales

The other reason we believe Nike remains a long-term buy: the maker of Air Force 1s as well as Jordan and Converse footwear has been successful in improving its direct-to-consumer business during the pandemic. And there's strong evidence its online sales have more room to expand.

The global health crisis has accelerated Nike’s shift to e-tail. It has created a direct-to-consumer business that's not just efficient but also responsible for improving the enterprise's profit margins. For several quarters, Nike’s online sales have surged more than 80%, exceeding the company’s target for revenue from this segment. It now makes up 30% of total sales.

During last week's conference call, Chief Financial Officer Matt Friend said, of online sales:

“Digital is increasingly becoming a part of everyone’s shopping journey, and we are well positioned to reach our vision of a 40% owned digital business by fiscal 2025.” 

Despite the uncertainty in the company’s near-term growth outlook, analysts on Wall Street continue to remain bullish on the stock, advising clients to take advantage of the weakness. According to analysts at UBS:

“While some uncertainty still exists around how long it will take supply-chain issues to clear up and if Nike’s China sales growth rate will accelerate, our view is investor sentiment will improve now that Nike has quantified the Vietnam factory shutdown impact.”

UBS rates Nike shares a buy with a $185 price target.

Stifel, which rates the stock a buy as well, with a $213 price target, said in its note to clients last week:

“We remain compelled by the business transformation to a higher margin, higher return economic model. Accordingly, we continue to view Nike as a top-tier core holding for large-cap growth investors and recommend using any weakness in shares in response to supply challenges as an opportunity to build positions.”

Bottom Line

Nike shares will likely face more weakness after the company disclosed supply-side issues and the uncertain outlook for its sales in the coming quarters. That weakness should be taken as a buying opportunity by investors who have a long-term investment horizon, given the strength of Nike’s brands and its ongoing push to expand its low-cost online sales.

Current Nike Weakness An Opportunity For Buy-And-Hold Stock Investors
 

Related Articles

Current Nike Weakness An Opportunity For Buy-And-Hold Stock Investors

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email