Nike Inc: Ride the Downtrend in NKE Stock

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NIKE Inc (NYSA:NKE) — Nike, the world’s leading designer and marketer of high-quality athletic footwear, has a strong financial position. However, according to S&P, this position is being increasingly offset by competitive global manufacturers. Its fiscal year ends May 31.

S&P recently cut NKE stock’s price target by $10 due to its price-to-earnings ratio of 25.7 being much higher than its peers. They also cut their FY-2017 earnings estimate by 8 cents to $2.46 and set FY-2018’s at $2.83. The company forecasts revenues in FY 2017 to be in the “high-single digits.” The May quarter earnings per share was reported unchanged at $0.49 but beat Capital IQ’s consensus by 1 cent.

Clearance sales, lackluster consumer response to new products and currency headwinds have also put a lid on results. The stock pays a dividend of $0.64 for a yield of 1.13%.

Despite the challenges, S&P has a 12-month target of $63 on NKE’s stock.

Technically NKE stock is trading in a Channel Down with resistance at $59 and support at about $50. The stock topped last November with a close at about $67, spiked in December, but resumed a downtrend in January. The channel has held a 10-point spread throughout the decline with prices fluctuating around its 50-day moving average.

NKE stock confirmed its longer-term bear market in April when a Death Cross was triggered. This occurs when the 50-day moving average crosses through the 200-day moving average. Late in June it hit a new low for the downtrend at under $51 and rallied to $59 early in July.

Because of the pronounced downtrend, sell NKE short at $58 with a trading target of $50 for a possible return of approximately 16%. As with all short sales place a stop-loss order at no less than 10% above the shorting price to protect against a theoretically unlimited loss.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/nike-nke-stock-downtrend/.

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