Nibbling On NKE


Nike (NKE) reported a bad quarter after the close last Thursday sending its shares down almost 20% on enormous volume on Friday. Shares are now trading at the lowest levels since the pandemic lows of March 2020. Is NKE a turnaround play?

What was disappointing about the quarter was the forecast. FY25 revenue is expected to be down mid-single digits with the current quarter down about 10%. In other words, the worst is yet to come….

Nevertheless, I think Friday’s selloff mostly prices in all the bad news and sets the stage for a turnaround in the months and years ahead. I’m not calling a bottom in shares. They can very well go lower in the short term. I’m saying that I think NKE represents good value here and that investors with a longer time horizon will do well.

While growth has stalled of late, NKE is still a legendary brand and my best guess is that they will find a way through these hard times. It usually pays to bet on great companies during difficult times – though not always. If the competition has actually surpassed NKE in terms of quality and mindshare and current trends continue, then shares could be dead money permanently. But I don’t think that’s the highest probability scenario.

In sum, at current levels I’m starting to nibble on NKE with a long term time horizon.

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