7. NIKE, Inc. (NYSE:NKE)
Average Upside Potential as of October 23: 13.23%
Number of Hedge Fund Holders: 66
Apparel and footwear giant NIKE, Inc. (NYSE:NKE) has been under pressure for the better part of the year amid disappointing financial results and guidance that have sent jitters about the company’s growth metrics. The stock was yet again under pressure after it delivered disappointing second-quarter results, with revenues dropping 10% and profits down 285 year over year. Failure to provide a forecast for the fiscal year ending in May also rattled investors.
Amid the disappointing results and muted outlook, Nike remains one of the best Dow stocks to buy, according to analysts, as it is in a transition period. NIKE, Inc. (NYSE:NKE) has already appointed Elliott Hill as its new CEO, tasked with reinvigorating its growth prospects. In addition to a new CEO, the company boasts of one of the strongest brands as a leader in the global sportswear industry, affirming its long-term prospects.
NIKE, Inc. (NYSE:NKE) continues to dominate the global sportswear market. Decades of innovation and skilful marketing to establish a strong customer connection have led to this position. Because of pricing power, the unique brand has reported an average gross margin of 44.7% over the last ten years.
While Nike is trading at an average P/E of 23, it is significantly lower than its average P/E of 37 in the past decade. Additionally, analysts on Wall Street rate the stock as a Buy with an average price target of $92.19, implying a 13.23% upside potential.
According to the Insider Monkey database, 66 hedge funds held bullish positions on NIKE, Inc. (NYSE:NKE) at the end of Q2 2024. This indicates a strong interest in the stock among institutional investors, despite a slight decrease from 71 in the previous quarter.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain.
Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and deteriorating macroeconomic conditions in the US and China further complicate its recovery. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified.”
