Nike Got Hit…What We Think

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Nike had its biggest single-day decline on Friday, June 28th, 2024 as this quarter was not a homer but more of a strikeout and a trip of the laces onto one’s face. But what does this rough day and guidance mean for Nike long-term and is it worth your money to dabble in? Well as for the dabble thing that is completely up to you as one has to think for themselves and here at the FatNarwhal, it is only a stepping stone in a complete process of one’s financial contemplation. But as we sit back on that sandy beach and watch them Narwhals swim by we’ve come to a couple of realizations. The retail market is very rough and competitive to stay on top and a decline in sales will always make an investor sweat in their sleep (even with whatever water-wicking crap Nike sells you). And it’s always a little nerve-racking when a CEO says they are going through a transitional period. These couple of main ideas as we dive a little deeper into the coral seems to be contributing factors to why the recent decline in Nike.
First last week we saw Nike report an EPS of $1.01 a share compared to the $.83 a share expected. We also saw Nike report $12.61 billion a share vs. $12.83 billion a share expected. Combined with a released guidance of a 10% drop in sales during the first quarter, which is more than many expected at around 3.2%. And these forecasted shaky roads for the company are mostly attributed to hard economic circumstances, and difficulties operating in other countries like China.
But what does the FatNawhal make of all of this? Well as the CEO said, which is true, that turnaround can take time if you are trying to build the long-term sustainable growth of a company. This will take potentially new marketing, products, or finding ways to continue to simply attract customers and bring in revenue. This is why we at the FatNarwhal think that Nike could be a solid long-term play because even though we think the next coming quarter could bring volatility, especially with the current economic factors leading to uncertainty, especially in the retail space and inflation. But generally, we think Nike is trading at a fairly cheap price with a price-earnings of the lowest in years at around 20. So maybe in small sections of adding Nike to one’s portfolio could be advantageous as a long-term play, or even a post-drop swing because the decline they’ve experienced recently was so significant. But overall Nike is coming together to look like a nice buy.