Apple CEO Tim Cook made a strong statement Wednesday by spending nearly $3 million on Nike (NYSE:NKE), one day after Nike reported an incredibly weak quarterly earnings report.
Cook bought 50,000 shares for $58.97 per share, his first open-market stock purchase in 20 years as a Nike board member. This was a significant departure from Cook’s previous purchases, which were made via equity or compensation grants.
Nike’s stock price surged by 4.6% on Christmas Eve to reach around $60. It was the biggest winner in S&P500.
Nike Stock: Tim Cook’s Purchase of Nike Stock Signals
Cook’s timing is amazing. Cook’s timing was impeccable. He purchased just hours after Nike announced earnings which shocked Wall Street.
Earnings per share were $0.53, which is a 32% drop from last year. Gross margins also dropped 300 basis points, to 40.6%.
Nike Direct-to-Consumer sales fell by 9%, and Nike had to offer heavy discounts.
Cook’s decision to buy the wreckage could mean one of two things. Either he believes in Elliott Hill’s plan for turnaround despite short-term challenges, or that he is seeing panic sales.
It’s all about the mechanics. Cook, Nike’s leading independent director, orchestrated Hill’s retirement return in October 2024.
Cook’s personal capital is at stake by buying 50,000 stocks and increasing his ownership to 105480 shares, which are worth approximately $6.2 million.
Robert Swan, former Intel CFO, also purchased 8,691 stocks at $57.54 for $500,000, a purchase that was made on the drop.
Insiders don’t always buy at the bottom.
The holiday-thin trading volume can cause movements to be exaggerated, so Wednesday’s rally of 4.6% could reverse rapidly once real money returns.
What is the best time to buy Nike stocks?
Nike’s valuation looks deceptively cheap until you dig deeper.
The stock is expensive at a price to earnings ratio trailing of 35.25 compared with the average for the Consumer Cyclical Sector of 18.86.
This high multiple is a reflection of crashing earnings. Nike is trading at 31,27x its forward earnings. This multiple seems more reasonable but still high for a firm that has guided to margin compression next quarter.
Hill’s bull case depends on its ability to restore wholesale relationships with Foot Locker, Dick’s Sporting Goods and Nike between 2020-23.
Los Angeles 2028 Olympics may provide marketing benefits for several years.
The stock price could rise to the historical average 25x multiple if Hill is able to restore Nike’s credibility in terms of product quality and sell-through at full prices. This would indicate a potential upside for earnings.
The risks, however, are structural. Nike estimates that tariffs will reduce gross margins in fiscal 2026 by 320 basis point.
China’s market demand is still lagging. Moody’s downgraded Nike’s credit rating in November. Hill told investors that the turnaround would “take a long time” and “there is no straightforward path.”
Cook’s buy is an important momentum signal for short-term traders. Long-term investors may find it a positive sign, but not a purchase button.
The following post is about Nike stock. Does Tim Cook’s acquisition make NKE an attractive buy? This post may change as new information becomes available
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