We recently compiled a list of the A Game Changer: Jim Cramer’s Latest Top 10 Stock Picks. In this article, we are going to take a look at where NIKE Inc. (NYSE:NKE) stands against Jim Cramer’s other stock picks.
Jim Cramer: Billions to Flood the Market as Double Rate Cut Sparks Stock Surge!
In a recent episode of Mad Money, Jim Cramer explains that a double rate cut, or a 50 basis point reduction, is likely to attract tens of billions of dollars into the stock market from investors who have been sitting on the sidelines. Many people have been holding onto cash in money funds, eager to invest, especially as rates start to decline. While some are tied up in CDs or treasuries, those inaccessible money funds see the opportunity to move their cash into high-yield dividend stocks.
Cramer warns that they need to act quickly, as these stocks will soon rise in price and lose their high-yield appeal. He also criticizes commentators on television who downplay the Fed’s impact by focusing on the national debt. He argues that these voices are not interested in helping everyday investors; instead, they cater to the wealthy. Cramer reminds listeners that their audience is diverse, and it’s essential to focus on making informed investment decisions.
“When you get a double rate cut, meaning a 50 basis point monster, well, that’s going to bring tens of billions of dollars into the stock market from the sidelines. The sidelines have been so lucrative for so long that people in money funds have been coveting their dollars. Sure, there are plenty of folks sitting in two- to three-year CDs or treasuries who can’t easily cash out, but if you’re in an easily accessible money fund, you can see rates are going lower now, right? That’s all the more incentive to put your cash into, say, dividend stocks with high yields. You’ve got to do it fast because pretty soon, the high yielders will rally to the point where they’re just mid-yielders.
No matter how smart they sound, the people who come on television to argue that the Fed’s actions don’t matter because the national debt is too big are being unhelpful. These people are not concerned with helping you make money; you’re not important to them. They’re speaking to the billionaire class. Yes, they crowded you out a long time ago. Remember, we do have all sorts of audiences.”
Additionally, Jim Cramer points out that many Wall Street analysts like to go against popular opinion, which leads them to downplay the importance of a half-point rate cut. He believes this perspective ignores common sense. Cramer acknowledges that while aging has its downsides, like not being able to move around as easily at events, he feels he has gained wisdom. He understands the situation better than those who argue that the rate cut indicates panic, simply by being present and observing the market.
“Everybody on Wall Street loves to be a contrarian, which is why so many commentators keep trying to minimize the impact of a half-point rate cut. Not me! No matter what, common sense dictates that there are always people who think they know better than common sense, and they don’t. There are so few advantages to age, I have to tell you.”
Can the 50 Basis Point Cut Spark Stock Gains and Revive Housing?
Jim Cramer points out that during rate cuts, there are many promising winners to consider, while the losers are easy to spot and should be avoided. He emphasizes that when the Wall Street Journal reported the chance of a 50 basis point cut, it opened up more opportunities for stocks to benefit. A smaller 25 basis point cut could have aided homebuilders if they had built more homes, but they’ve been reluctant due to high rates. However, a 50 basis point cut will lower mortgage rates, making homes more affordable and likely giving a boost to the housing market.
“The winners in an easing cycle are varied and exciting, while the losers are obvious and must be avoided. From the moment the Journal reported that there could be a 50 basis point cut, the swatch of what can go higher expanded dogmatically. A 25-point cut would have been truly beneficial for homebuilders if they would just start building a lot more homes, that’s something they’ve been reluctant to do because rates are still too high. But a 50 basis point cut means lower mortgages for certain and, therefore, more affordable homes.”
Our Methodology:
In this article, we delve into the latest episode of Jim Cramer’s Morning Thoughts, where he analyzed various stocks. We rank these companies based on their popularity among hedge funds, starting with the least owned and moving up to the most favored.
At Insider Monkey we are obsessed with 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).
A team of trainers and athletes displaying a wide range of athletic and casual footwear.
NIKE Inc. (NYSE:NKE)
Number of Hedge Fund Investors: 66
Jim Cramer notes that Bernstein has reduced its price target for NIKE Inc. (NYSE:NKE) from $112 to $109 per share while maintaining an outperform buy rating. The analysts cited concerns raised by former NIKE Inc. (NYSE:NKE) executives as the reason for this adjustment.
“Bernstein trimmed its Nike price target to $109 per share from $112 and kept its outperform buy rating. The analysts cited concerns they heard from former Nike executives.”
NIKE, Inc. (NYSE:NKE) is a leading brand in athletic footwear and apparel, and there are several reasons to be optimistic about its future. In its Q2 2024 earnings report, NIKE, Inc. (NYSE:NKE) announced a 10% increase in total revenues to $13.3 billion, with net income rising to $1.5 billion. A key highlight was a 20% growth in direct-to-consumer sales, demonstrating the effectiveness of its online sales strategy. NIKE, Inc. (NYSE:NKE) is also focused on innovation, launching new products made from sustainable materials that resonate with younger consumers, especially Gen Z and millennials.
Furthermore, NIKE, Inc. (NYSE:NKE) is expanding into emerging markets like Asia and Latin America, where interest in premium athletic gear is on the rise. Strategic partnerships with well-known athletes and influencers have boosted its brand visibility and attractiveness. NIKE, Inc. (NYSE:NKE)’s commitment to sustainability matches current consumer preferences for eco-friendly brands, which could help attract more customers.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor 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 its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. 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.”
Overall NKE ranks 5th on our list of Jim Cramer’s latest top 10 stock picks. While we acknowledge the potential of NKE as an investment, our conviction lies in the belief that under the radar 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.
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Disclosure: None. This article is originally published at Insider Monkey.