Nike Stock Analysis: Why The Worst Might Be Over

Nike stock is down 80% from highs. It has a juicy dividend yield of 4.83% [music] and it remains incredibly profitable. On the surface, Nike stock is a nobrainer buy right now. But there's a reason why the stock has fallen every year for the past 5 years. growth is declining and the dividend is at high risk of getting cut soon. So before you load up on Nike stock, you need to understand why the stock keeps falling because there's a good chance the stock might keep going lower. Once you understand why Nike stock is falling, you'll know exactly when it should bottom out and start going back up again. For those of you who are new to this channel, my name is Stock Curry. I'm a former Meil Lynch and Morgan Stanley investment banker, and I've been trading for over 25 years. And in this video, I'm going to show you exactly what you need to watch out for on Nike stock. We're going to cover the issues with the dividend. We're going to look at the current valuation of the stock. Then I'm going to explain why Nike stock has been falling for the past 5 years. And finally, most importantly, we're going to talk about when Nike stock will bottom out and the turnaround story that is coming up for Nike. One of the main reasons people have started to buy Nike stock over the past few weeks is the dividend yield. At 4.83%, 83%. Nike has a pretty decent dividend yield. It may not be the highest dividend yield in the stock market, but it is above average. The problem is that this dividend yield is at high risk of getting cut. Seeking Alpha lists the odds of a dividend cut at 64.4%. The reason for that is that Nike's growth is slowing down and a decline in profits means the dividend will have to decline also. Nike cannot afford to keep paying a high dividend when their profits are declining. Nike's current dividend is more than their entire profits by some metrics. In order for Nike to pay out a dividend that is in line with the sector average, Nike will have to cut their dividend by about 60%. And that would lower the dividend yield down to 2%, which is more in line with the sector average. And this wouldn't be the first time Nike cut its dividend. Nike cut their dividend in 2012 from 36 cents down to 21 cents and they cut their dividend again in 2016 from 32 cents down to 16. If or perhaps I should say when Nike cuts their dividend again, this will be the fourth time Nike has cut their dividend in the stock's history. And dividend cuts result in downward selling pressure on the stock as investors who owned Nike just for the dividend start selling the stock in order to buy other stocks that pay higher dividend yields. Just because the stock is down 80% from highs does not mean it's now undervalued. And this is a trap a lot of people are falling into. A lot of retail investors think that just because the stock is down 80% that means it's near a bottom. But a look back at popular stocks from 2021 should be a warning to all investors who think Nike is near a bottom just because it's down 80%. Teldoc, ticker TDOC, was very popular among retail investors in 2021 and now the stock is down over 99% from highs and it just keeps falling. Bioanogenomics, ticker BGO, is another stock that was very popular among retail investors in 2021, and it also is down well over 99% from highs. NEO is another stock that was popular in 2021, and it's down 95% from all-time highs. So, just because a stock is down 80% does not mean that it's at the bottom. it could keep falling. One analyst sees Nike falling all the way down to $19, which would be an additional 45% lower from the current stock price. However, it should be noted that some analysts see Nike stock rising with one analyst predicting it will go back up to $62 over the next 12 months. And there are some very good reasons why Nike could bottom out and start going back up here. I'll discuss the bullcase and all of the reasons why Nike stock might bottom out here and start going back up. But first, it's important for you to understand the valuation because the current valuation might not be as low as you think it is. Nike is currently rated a C plus on valuation. That means that despite the 80% decline in the stock price, it's still a little bit overvalued. Nike would have to drop down to around $20 per share in order to be at a fair price. And that makes the $19 price target one analyst gave seem very reasonable. But despite all of the bearishness around Nike stock, there are some good reasons why Nike is most likely very close to a bottom here. It appears like Nike is right about here [snorts] on the stock cycle chart. And Nike still needs to go through the accumulation phase, which could last anywhere from a few months to a few years before the stock starts taking off again. So, if you do want to buy Nike stock, you have time. This is not a stock that you need to load up on or get FOMO over. This is a stock that you can slowly dollarc cost average into over the next few years. And if you don't want to wait a year or longer to make money with Nike stock, you can come join us in Stock Dads where we are making money like this every single day. We have over 20 full-time multi-millionaire traders in stock ads who post every trade they make in real time. And regular people just like you are copying their trades and making money right along with us. If you want to make money like this also, then come join us in Stock Dads. You can get more information about Stock Dads and join us at weeprofit.io/ io/stockdads or by scanning the QR code on your TV screen. Before we discuss the turnaround that Nike is implementing right now, it's important to understand why Nike fell in the first place. Because while Nike is implementing a solid turnaround strategy, there are still some serious issues that Nike needs to overcome. Nike exploded in popularity during the late9s thanks to iconic shoes such as the Nike Air Max and Nike Air Jordan. But as these shoes became outdated, Nike failed to introduce new shoes that people actually wanted. Nike's most famous flop was their skateboard brand Savior. At the same time, Nike shifted away from wholesale distribution to retail stores [music] such as Foot Locker and Dick Sporting Goods and towards direct to consumer online sales instead. And while the strategy initially increased sales, it hurt their relationships with wholesalers. As a result, more shelf space was given to competing brands. And this further hurt Nike sales while at the same time helped their competitors. While all of that was going on, Nike was dealing with massive inventory issues. They had to provide huge discounts in order to clear out old inventory. And those discounts caused both revenue and profits to decline. But as it turns out, this inventory cleanup that Nike started is actually the first step in Nike's turnaround story. While Nike does expect sales to continue to decline through the end of 2027, the company does expect revenue and profits to start rising again in 2028. Nike expects to finish fixing their inventory and supply chain issues in 2027, and that should open up the door to an increase in both revenues and profits starting in 2028. And inventory isn't the only issue Nike is fixing. After years of failed products, Nike just announced a new partnership with Caitlyn Clark, a famous American WNBA player. The Nike Caitlyn 1 has been extremely popular. The shoe shattered prior sales records and sold out in just 2 hours. And this is just the beginning of Nike's turnaround story. More versions of Clark shoes will be released soon, and there is also a Taylor Swift shoe coming. Best of all, management is restoring their relationships with wholesalers by launching the Caitlyn one in over 5,000 stores, which is twice as many stores as most Nike shoes debut in. with Nike's new partnerships with today's hottest celebrities as well as their turnaround and their inventory issues and their renewed partnerships with wholesalers. Nike's turnaround story is off to a great start and it should continue getting better. Nike stock might keep falling through the end of this year, but it is expected to bottom out sometime in 2027 and start going back up again. Even though profits and revenues might not start going back up until 2028, it's important to remember that the stock market is forwardlooking and soon as Nike starts providing good forward guidance, I do expect the stock to bottom out and start going back up again. With a stock down 80% from all-time highs, there's plenty of room for Nike to rally, especially as investor sentiment improves and Nike continues to see record-breaking sales from its new product launches. The question isn't if Nike is going to bottom out and start going back up again. The question is when. And based upon Nike success with the recent turnaround and the success of the recent product launches, I do think that turnaround is going to happen sooner rather than later. Let me know in the comments below what you think about Nike