Amid an uninspiring day on Wall Street, shares of athletic apparel stalwart Nike (NYSE:NKE) did little to change the atmosphere, gaining under 1%. However, an insider acquisition of NKE stock raised eyebrows for its relative rarity. In addition, the tacit endorsement of the business coincides with seemingly positive action in the options market.
According to a filing with the U.S. Securities and Exchange Commission (SEC), Director Bob Swan acquired 13,072 shares of NKE stock on Oct. 2. Further, the disclosure document indicates that the average share price of the transaction landed at $96.13. Overall, this translates to roughly $1.3 million worth of Nike’s equity acquired.
Interestingly, Barron’s points out that Swan — who formerly headed technology giant Intel (NASDAQ:INTC) — now owns 18,005 shares of NKE stock. Further, he has another 1,580 shares through a family trust. The latest purchase materialized via an automated trading plan adopted on July 3.
From Barron’s, Nike didn’t respond to a request to make Swan available for comment. Generally speaking, only one rational motivation exists for insiders buying equity in their companies: they believe shares will move higher.
Insider Bullishness in NKE Stock May Coincide With a Reversal
While Nike needs no justification for its existence, given its worldwide popularity, it’s also fair to say that it’s been a disappointment so far this year. Since the January opener, Nike stock slipped more than 19%, frustrating stakeholders who bought in during a share resurgence that materialized about one year ago.
Therefore, Swan’s acquisition of NKE stock would be welcome news. In addition, it’s notable for its rarity. Per Fintel, only 14 insiders — inclusive of Swan’s purchase — bought NKE going back to October 2003. The last insider buy occurred in February of this year. In sharp contrast, insiders sold NKE across 474 transactions during the aforementioned time period.
What may be even more encouraging is the latest rumblings in the derivatives market. Most recently, three big block transactions possibly support the bullish case for NKE stock: major traders writing (selling) 1,021 contracts of the Oct 6 ’23 88.00 Put, 501 contracts of the Jan 19 ’24 92.50 Put and 548 contracts of the Jan 19 ’24 97.50 Put.
Per Investopedia, a put option represents a derivative contract that gives the option holder the right (but not the obligation) to exercise the contract, in this case, to sell the underlying asset at the listed strike price. On the other hand, a put writer (seller) has the obligation (but not the right) to fulfill the contract if exercised.
Therefore, it’s possible that there could be a floor in NKE between $88 and $97.50. At the time of writing, NKE trades at $95.58.
Why It Matters
According to TipRanks, analysts peg NKE stock as a consensus moderate buy. This assessment breaks down as 18 buys, 10 holds and one sell rating. Overall, the average price target lands at $120.54, implying a 26% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
