Opinions
Jim Cramer - Mad Money
Nike Inc
NKE-N
DON'T BUY
Jul 08, 2024
Stock price when the opinion was issued
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Trades around 20x PE. Options: implied volatility is over 30, so you're paid twice as much as the broader market. Because the stock has been under pressure for a long time, these options are more expensive than others. Currently, at May $70 puts you can get $3.90, an attractive 5% return if shares stay flat over 3 months.
Added recently around current level of $77. Online push didn't work; it can be part of the business, but not the main part. New CEO has gone back to basics. Huge FCF, minimal debt. Incredibly well positioned. Chance to buy on sale the world's best business in the sector.
Good news is it's the largest in athletic wear and shoes. No debt, tons of firepower. Industry leader. Slow fixes from horrendous mistakes. Looking for earnings improvement in 2026. Worst is over. To bring manufacturing back to the US would be way too expensive for this type of company.
The largest sneaker company in the world. Almost zero debt. Are still buying backs shares and paying dividends. They changed CEOs and ditched his distribution strategy. ON is a competitor, but Nike has the money to produce competitive products. Are cleaning out past inventories which will impact the next few quarters, but earnings should double in the next few years. Shares are cheap now.
(Analysts’ price target is $77.54)
Is there any hope? After its last recent report, shares plunged 20% to march 2020 Covid levels. It still isn't rebounding, but still falling today. Sales were -2% YOY from weakness in North American and EMEA, though sales in China were actually +3%. They beat earnings though largely from cost cuts. Overall, it was a mixed quarter, but the forecast was grim, with a 10% sales decline. Their return to sales growth will take a long time.