Nike released its earnings report for the third quarter three weeks ago. The disappointing report was followed by usual management optimism, promising to better serve the athletes.
The company still has much to do in order to inspire investor confidence. Management has labelled the upcoming year as a “transitional” year. The business could be at a turning point, and ready for a boom by 2025. Investors may have to get used to a lackluster performance.
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Stocks are closing in fast on a key support level due to YTD’s poor performance. Nike’s bull run has been re-energised by a trendline drawn on a logarithmic chart from 1993 until today.
This is the fourth time that it has approached this support line.
Do you mean to say that now is the time for you to start investing in this stock? Wait? Waiting is better for three reasons. The historic support will not last.
Why the Support Won’t Hold
The demand is drying up
Nike has better margins for its products. This is mainly due to the fact that consumers are now able to buy more easily from Nike’s site.
However, direct sales revenues in Q4 decreased while wholesales revenue increased. It is alarming to see the downward trend in direct sales. Wholesale sales do not compensate for this. Nike will not benefit from this income once retailers restock shelves.
Then things can get ugly.
New products are the new bet
Launching better products is one way that management can counteract the downward trend. Nike plans to launch new products later in the year. The company hopes that this will boost sales.
How confident is an investor to bet his money now on the belief that the firm will produce better products in the future?
This is a big bet. If it fails, then the consequences could be very bad.
Battling younger brands
Nike has been around for a long time and faced similar struggles in the past. It has never failed to deliver. This time it’s battling with younger brands who can ride the fashion trend much more effectively than Nike.
It doesn’t really matter how low the price is if the Nike brand continues to decline and the more trendy brands appeal to the athletes.
Nike Stock is riskier than you think, according to the three reasons above. Investors might want to hold off until later this year in order to observe how the transitional year turns out.
The post Nike is approaching its 3-decade-strong support level. Here’s why this will fail. may be updated as new information becomes available
