We recently published a list of Jim Cramer Stocks: 10 Latest Calls. Since Nike Inc (NYSE:NKE) ranks 3rd on the list, it deserves a deeper look.
Jim Cramer in a new program on CNBC talked about the latest pullback on Tuesday, when the market snapped its 8-day winning streak. Cramer said that the hopes of rate cuts were buoying the markets all along. According to Cramer, when a company posted a good quarter, its stock roared. If a company reported a bad quarter, investors assumed it was the “last bad quarter” because the Fed was about to start cutting rates.
“In other words, companies could do no wrong. But not today. Today we had a bit of a reckoning and dose of reality being thrown in our faces.”
Cramer talked about two home improvement companies that recently reported their quarters. According to Cramer, these results show that the consumer is still extremely cautious, and high mortgage rates and inflation is keeping spending on big-ticket items depressed.
“Wall Street is maybe expecting not good news from the Fed on Friday and therefore a slowdown, a bad slowdown,” Cramer said.
Jim Cramer said the market is “rational” again and the optimism needed to be “tempered” before the next rally.
For this article we watched several latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s recommending investors to buy or sell. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Nike Inc (NYSE:NKE)
Number of Hedge Fund Investors: 66
Jim Cramer in a latest program grilled Nike’s management and said the company might need big changes.
“I think it’s time we have to come to terms with the idea that something may be very wrong with Nike. Otherwise, how do you explain the stock plunging from $122 to $78,” said Cramer.
Cramer said there is a similarity between Nike’s current CEO and Starbucks’ former CEO.
“These two management consultants have something else in common. They always have said and agree that they are doing a great job, even when the stock says the opposite.”
Nike Inc (NYSE:NKE) has indeed been a loser this year, down about 21% so far. Nike is getting battered in China amid declining sales as consumers cut back on spending due to rising inflation. Nike Inc (NYSE:NKE) also cut its fiscal first-quarter guidance as sales are likely to decline in their upcoming Q1.
However, Nike Inc (NYSE:NKE) bulls believe the company will be able to come out of this crisis following rate cuts and the easing of global economic situation. Nike remains a giant, with about $11 billion in cash, sufficient to cover its $8.9 billion long-term debt. Nike Inc (NYSE:NKE) is also the leader in the footwear market which is expected to grow at a CAGR of 6.86% from $173.89 billion in 2024 to $242.33 billion by 2029. Nike Inc (NYSE:NKE) sales in the market are about 100% higher than Adidas, the second-biggest player in the market.
Another strong reason to own Nike Inc (NYSE:NKE) shares is its dividend, which has grown for two decades now without a break.
Nike Inc (NYSE:NKE) has a forward P/E ratio of about 23, about 35% lower than its five-year average. This makes the stock undervalued for long-term investors with a large risk appetite.
ClearBridge Large Cap Growth Strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“Other moves during the quarter included sales of United Parcel Service (UPS) and NIKE, Inc. (NYSE:NKE). Nike has become overly reliant on key platforms, like Jordan, for revenue growth while innovation in areas like running has lagged. Nike could face continued revenue and profit pressure as it invests to re-invigorate innovation and re-position the business back toward wholesale outlets. As such, we are seeking out better ways to participate in the global consumer recovery in companies where earnings estimates have already reset.”
Overall, Nike Inc (NYSE:NKE) ranks 3rd on Insider Monkey’s list titled Jim Cramer Stocks: 10 Latest Calls. While we acknowledge the potential of Nike Inc (NYSE:NKE), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
