After the worst run for Nike company stock in its growth story as a public company over the last 44 years, there could be some light at the end of the tunnel for Nike investors after NKE shares tallied their longest winning streak in over eight years, pushed higher by a range of actions.
NKE stock is up 16.5 percent since August 5 but remains down 23 percent year-to-date (YTD) following the crash of shares after the company’s latest fiscal year-end report.
If the stock fails to reverse the company’s YTD decline, 2024 would be the third straight year of declines, a streak not seen since Nike’s IPO in December 1980. Shares got a bit of a lift last week, but much has stayed the same regarding product, marketing and outlook.
So why the sudden jump in NKE shares?
Nike reported its fiscal fourth quarter and full-year results on June 27 after the market closed with NKE shares at $94.19. By morning, the after-market and pre-market buyers had their way with the stock after a Morgan Stanley downgrade and the weak outlook projected by company management and the admission that something had gone wrong inside the berm in Beaverton, OR. UBS, Stifel, and JPMorgan also downgraded shares, and Williams Trading cut its price target to $67. At the time, Williams said that “the major problem is that the FY25 guidance likely does not represent the worst-case scenario.”
Fast-forward six weeks, and the company has moved to focus Dr. Thom Clarke back into a key innovation role with the company and bring former customer relationship guru Tom Peddie out of retirement as VP of marketplace partners. Peddie worked for Nike for 30 years before retiring in 2020. He was, most recently, VP and GM of North America. A Bloomberg news report citing an internal Nike memo also said the company made the move to “mend relationships with retailers as the sneaker maker struggles with falling sales.”
But was that enough to get the market excited? For some, yes. But to drive the stock up? Not really.
What did the trick was the age-old motivator, FOMO, or fear of missing out, as it became public knowledge that Bill Ackman’s Pershing Square Capital Management LP took a $229 million position in the world’s largest active lifestyle company last Wednesday, August 14.
The speculation is that the move helped allay some fears on Wall Street that activist investors could target Nike after its troubling June 27 conference call.
The corresponding rise in shares also got Williams Trading and recent Nike contrarian analyst Sam Poser off the sidelines. On Friday afternoon, August 16, Poser moved NKE shares to a BUY from SELL and raised his price target to $93 from the $67 price cut level he established following the end-of-year report. Poser sees the Peddie re-hire as key, suggesting that it indicates that a change “is brewing.”
Poser said he expects that poor stock performance, due in part to lackluster product launches, disappointing sales performance, and weaker guidance, upped the bet that a “C-Suite change occurs,” even though that may take some time.
“We foresee improvement in the stock price well ahead of improvements of Nike’s business and recommend investors to be patient,” Poser said.
Image courtesy Nike, Inc.
