Nike trajectory - Med term target $54 in 2019?
Updated
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Disclosure; I haven't been tracking Nike until a couple of days ago and thought I would post this to see if I can get some feedback. I am not presently able to short trade this share so am just watching for now. I was drawn to it by recent news about presumptive Np.1 NBA draft pick Zion Williamson's and minor injury caused by a Nike shoe blowout. My analysis does in no way hinge on this story, but it can't help the Nike share price and it may just be enough to allow the previous swing high to not be exceeded. A lot of people (who aren't top level sports talent) can place themselves in Zion's shoes (like literally).
I would also point to Nike's increasingly politicised marketing campaigns as a cause for investor concern (personally I am a supporter or Colin Kaepernick's protest and would like to see him play again) simply because they have decided to place a talented Sportsman who isn't presently playing at high levels at the centre of their marketing campaign. You don't need to wear the best designed sports shoe to protest inequality. There is a risk that Nike's huge (31% of costs) marketing budget has become at least partially un-linked to mastery in the game. This perceived link had, until now, served them very well.
Air Jordans were the highest selling shoe because almost everyone wanted to emulate or be associated with Michael Jordan's absolutely dominant and universally recognised basketball mastery. Even sales of these have slowed recently (thestreet.com/investing/why-nike-s-jordan-brand-isn-t-flying-as-high-these-days-14637954).
These are sideline issues compared to the increasing miscompare between Nike's share price and dividend yields. in late 2017 Nike's PE ratio went from 22 in August and 25 in November to 62 in Feb 2018 and 65.57 in August 2018 (macrotrends.net/stocks/charts/NKE/nike/pe-ratio) also (ycharts.com/companies/NKE/pe_ratio). This is over-extended bubble territory. When PE ratios get too high and EPS fall investors are understandably less willing to accept share price volatility (which increases), so any price weakness should result in a steep selloff.
This is a conditional post; I have shown on the chart what I expect to happen over the coming weeks. If the price and RSI both show a lower high and the MACD MA crossover holds and heads downwards for the zero line I think a deep correction is in play. If these three things happen, I would say $54 per share is conservative. Results are expected in a few days at the end of February, expect the high of $86.04 to not be exceeded and the results to be insufficient to support such an inflated PE ratio (which, of course, hinges on very bullish expectations of future growth). Even if Nike posts expected or above expected earnings guidance I expect there to be a sell-off as investors realise how over-extended the share price has become.
This was seen in 2018: "Investors weren't all that impressed. 10 percent revenue growth ... it really needed to be a little bit more than that," Stacey Widlitz, president of consulting firm SW Retail Advisors, told CNBC (cnbc.com/2018/09/25/nike-q1-2019-earnings.html)."
My view is, of course, coloured by a an increasingly bearish view of the S&P500 and expectations of a European (Italy in recession, Germany likely to follow with GDP growth currently at 0%) and US recession possibly apparent shortly. Most analysts are calling a 2020 US recession. I just think it may be brought forward a few months. Nike has increased revenue by raising prices for its goods, something that may shortly become unsustainable. I will be following with interest. Good luck everyone and protect those funds.
Disclosure; I haven't been tracking Nike until a couple of days ago and thought I would post this to see if I can get some feedback. I am not presently able to short trade this share so am just watching for now. I was drawn to it by recent news about presumptive Np.1 NBA draft pick Zion Williamson's and minor injury caused by a Nike shoe blowout. My analysis does in no way hinge on this story, but it can't help the Nike share price and it may just be enough to allow the previous swing high to not be exceeded. A lot of people (who aren't top level sports talent) can place themselves in Zion's shoes (like literally).
I would also point to Nike's increasingly politicised marketing campaigns as a cause for investor concern (personally I am a supporter or Colin Kaepernick's protest and would like to see him play again) simply because they have decided to place a talented Sportsman who isn't presently playing at high levels at the centre of their marketing campaign. You don't need to wear the best designed sports shoe to protest inequality. There is a risk that Nike's huge (31% of costs) marketing budget has become at least partially un-linked to mastery in the game. This perceived link had, until now, served them very well.
Air Jordans were the highest selling shoe because almost everyone wanted to emulate or be associated with Michael Jordan's absolutely dominant and universally recognised basketball mastery. Even sales of these have slowed recently (thestreet.com/investing/why-nike-s-jordan-brand-isn-t-flying-as-high-these-days-14637954).
These are sideline issues compared to the increasing miscompare between Nike's share price and dividend yields. in late 2017 Nike's PE ratio went from 22 in August and 25 in November to 62 in Feb 2018 and 65.57 in August 2018 (macrotrends.net/stocks/charts/NKE/nike/pe-ratio) also (ycharts.com/companies/NKE/pe_ratio). This is over-extended bubble territory. When PE ratios get too high and EPS fall investors are understandably less willing to accept share price volatility (which increases), so any price weakness should result in a steep selloff.
This is a conditional post; I have shown on the chart what I expect to happen over the coming weeks. If the price and RSI both show a lower high and the MACD MA crossover holds and heads downwards for the zero line I think a deep correction is in play. If these three things happen, I would say $54 per share is conservative. Results are expected in a few days at the end of February, expect the high of $86.04 to not be exceeded and the results to be insufficient to support such an inflated PE ratio (which, of course, hinges on very bullish expectations of future growth). Even if Nike posts expected or above expected earnings guidance I expect there to be a sell-off as investors realise how over-extended the share price has become.
This was seen in 2018: "Investors weren't all that impressed. 10 percent revenue growth ... it really needed to be a little bit more than that," Stacey Widlitz, president of consulting firm SW Retail Advisors, told CNBC (cnbc.com/2018/09/25/nike-q1-2019-earnings.html)."
My view is, of course, coloured by a an increasingly bearish view of the S&P500 and expectations of a European (Italy in recession, Germany likely to follow with GDP growth currently at 0%) and US recession possibly apparent shortly. Most analysts are calling a 2020 US recession. I just think it may be brought forward a few months. Nike has increased revenue by raising prices for its goods, something that may shortly become unsustainable. I will be following with interest. Good luck everyone and protect those funds.
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I am not trading this, just following. I would say that my scenario has eventuated (even though Nike set a higher high recently. Nike is in a correction.
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