Key Points
- Institutional activity in has been bearish.
- The analysts still like the stock and are supporting the bottom.
- The next catalyst could be Q3 earnings.
The institutions have been selling shares of Nike (NYSE: NKE) and weighing on the price action but the winged goddess of victory is ready to soar once more. While the institutions have been shedding shares, netting a decline for 3 of the 4 quarters of 2022, the analysts are buying. As it is, the institutions have only sold about 0.35% of the company and their holdings are relatively strong at 64% so it really isn’t much of a headwind.
The most that can be made of the institutional activity is rotation and that’s not surprising given the high 37X valuation put on the stock. At that level, there are cheaper and easier ways to earn a 1.2% dividend (or better) but Nike may still be a name you want to own. There are a number of catalysts brewing that could lead to an even higher valuation in the coming year.
The Analysts Are Upping The Ante For Nike
Nike suffered a string of negative commentary in the first 3 quarters of 2022 that have the consensus price target down 35% on a YOY basis. This is bad news for long-term holders of the stock because it has the share price well off of the high but the tides are changing. The latest activity is a string of 6 commentaries that all have the stock bottoming and set to reverse.
The commentaries include 2 initiated price targets and 4 boosted price targets that come with an Outperform rating compared to the Marketbeat.com consensus of Moderate Buy and a price target above the consensus as well. The takeaway is the broad consensus has fallen in the last 12 months but began moving higher about 30 days ago and momentum is building.
Among the catalysts for the stock are the 21st consecutive dividend increase, an increase that has it within striking distance of Dividend Aristocrat Status. Investors with the fortitude to hold the stock for 4 more years will be treated to including the Dividend Aristocrats index and another boost in overall ownership.
Another catalyst is a move into Web 3.0 otherwise known as the metaverse. This move includes branding content in order to connect with the customer base in an accretive manner but the big news is China. China’s reopening will have a resounding impact on Nike’s supply chain as well as open up one of its biggest markets.
In regards to Nike’s dividend, it is a lower-yielding stock at only 1.2% and below the broad market average but it is not without attractive qualities. Not only is the company on track to reach Dividend Aristocrat status but the outlook for growth is robust.
The payout ratio is very low at 37% of earnings and at levels that should be able to sustain dividend increases for several decades. Along with this is an 11% CAGR that is sufficiently high to be attractive but not so high as to cause worry. At this pace, the company can continue to increase with little change provided growth is still in the outlook as well.
Nike Reports Q3 Results On December 20th
Nike is slated to report earnings in about a week and the outlook is mixed. The company is expected to post a slight sequential revenue decline and a YOY revenue increase coupled with margin contraction in both comparisons.
Margins are expected to be impacted by supply chain costs as well as inventory clearing actions that may hurt revenue as well. Longer-term, Nike is expected to see both revenue and earnings expand significantly in 2023 which is what will ultimately drive price action over the next few months.
The Nike price action is showing signs of a bottom that could turn into a reversal. The question is if resistance at the $115 level can be broken. If not, the stock is not doomed to reverse back to its lows because a Head & Shoulders pattern may be forming. In this scenario, the price action may retreat from the $115 level but it will be used as an entry point that eventually propels the stock higher. The catalyst for this move could be the Q3 earnings report.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| NIKE (NKE) | $65.90 | +0.3% | 2.49% | 33.79 | Moderate Buy | $82.24 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
- Professional Background: Thomas Hughes is the Managing Partner of Passive Market Intelligence LLC, a market research platform he launched in 2023 with the mission: “We watch the market so you don't have to.” He has worked as a blogger, stock market commentator, and independent analyst since 2010 and has been actively involved in trading and investing since 2005.
- Credentials: He holds an Associate of Arts in Culinary Technology—training that honed his discipline, attention to detail, and ability to anticipate outcomes, all of which carry over into his work as a market analyst.
- Finance Experience: Thomas has been writing about finance and investing since 2011, when he discovered it could be more than a personal passion—it could be a profession. He’s been a contributing writer for InsiderTrades.com since 2019.
- Writing Focus: He specializes in the S&P 500, small-cap stocks, dividend and high-yield strategies, consumer staples, retail, technology, oil, and cryptocurrencies. His analysis blends chart-based technical setups with key fundamental insights, helping readers identify actionable trends.
- Investment Approach: Thomas takes a hybrid approach that combines technical analysis with deep fundamental research. He often writes about macroeconomic shifts, earnings trends, and sentiment-based trading signals.
- Inspiration: Thomas first became interested in stocks after attending a seminar on how to buy and sell your own shares. That event opened his eyes to the market's potential and sparked a lifelong interest in investing.
- Fun Fact: Thomas took up model railroading by accident a few years ago—and now he can’t stop running the rails.
- Areas of Expertise: Technical and fundamental analysis, S&P 500, retail and consumer sectors, dividends, market trends
Education
Associate of Arts in Culinary Technology
