We recently published a list of 10 Worst Performing Dow Stocks Year-to-Date. In this article, we are going to take a look at where NIKE (NYSE:NKE) stands against other worst performing Dow stocks year-to-date.
After the disastrous performance of 2022, the market has recovered better than expected and is on a growth trajectory. According to BlackRock’s Q4 2024 Equity Market Outlook, despite concerns about the economy, fundamentals have kept stocks resilient. Opportunities are seen in large-cap stocks, which may outperform both mega and small caps.
Volatility is viewed as normal and can create buying opportunities, especially when driven by market sentiment rather than fundamentals. Historically, market corrections of 10% or more are common but long-term investors have still enjoyed solid returns.
The report states that elections and Fed rate cuts may also impact the market, with rate cuts typically benefiting large-cap and high-quality stocks. Healthcare and consumer staples sectors have traditionally performed well after rate cuts, while cyclical sectors may improve as the economy recovers.
Finally, it mentioned that technology, which is usually a laggard in rate-cutting cycles, looks well-positioned this time due to innovations like AI. Long-term patience is essential in navigating volatility, as the market has proven resilient over decades through various crises.
READ ALSO: 8 Best Communication Stocks To Buy According to Analysts and 10 Worst Performing Blue Chip Stocks in 2024
Evaluating Volatility and Valuations in Today’s Stock Market
In a CNBC interview, chief strategist and economist of Solus Alternative Asset, Dan Greenhaus discussed stock market volatility, with mega-cap earnings and the upcoming election contributing to potential fluctuations. He mentioned that the market is already experiencing some volatility, as reflected in the elevated VIX. Despite this, he highlighted that the economy is still growing, albeit at a slower pace, and earnings are rising, which is creating a generally favorable environment for equities.
Greenhaus also addressed concerns about market valuations and noted that while current multiples are high historically, determining what constitutes “rich” valuation levels can be difficult without hindsight.
Lastly, Greenhaus referenced a trading strategy of “buying high and selling higher,” suggesting that investors should remain engaged in the market even during record highs.
Our Methodology
For this article, we checked the year-to-date performance of all the Dow components and selected 10 stocks out of 30, that had the worst share price performance on a year-to-date basis on October 21. We listed the stocks in descending order of their share price performance. We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s Q2 database of 912 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of trainers and athletes displaying a wide range of athletic and casual footwear.
NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Share Price Performance Year-to-Date: -23.53%
NIKE, Inc. (NYSE:NKE) designs, develops, and markets athletic footwear, apparel, equipment, and accessories. It stands as the leading global seller in this sector. The company operates through both direct sales through NIKE-owned stores and digital platforms and wholesale channels that include independent distributors and licensees across numerous countries. Most of its products are manufactured by independent contractors outside the U.S.
Some of NIKE’s (NYSE:NKE) main issues include intense competition, declining earnings and revenue, and a weak revenue forecast for fiscal Q2. In fiscal Q1 2025, while the company beat the earnings estimates by $0.18 after reporting an EPS of $0.70, they were down 26% year-over-year. The revenue missed the estimates by $50 million and declined by 10%.
The results met the company’s expectations but showed lower-than-anticipated unit sales, especially in NIKE Digital and partner stores in Greater China. The company is intentionally reducing its reliance on classic footwear franchises, leading to a decline in revenue from these products. As the company shifts its product portfolio, it expects continued challenges in the short term, especially in its lifestyle and Jordan brand sectors.
NIKE (NYSE:NKE) expects that Q2 revenues will also decline, with projected gross margins impacted by higher promotional activity and supply chain challenges. Moreover, the company has been seeing quite a neutral sentiment from analysts for the near term as well. The latest Hold ratings were given by Piper Sandler and UBS on October 11 and 15, respectively. The price targets of $80 and $82 also show a slight downside to the company stock as of October 18.
Coho Partners stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“While we believe each of those companies is performing in line with or better than our expectations and that the moves lower are unjustified, both CVS and NIKE, Inc. (NYSE:NKE) reported disappointing performance in recent results. For Nike, the company reported mixed fourth quarter Fiscal 2024 results and weak Fiscal 2025 guidance, reflecting top line pressure from lifestyle product slowing, lower digital sales and increased macro headwinds in international markets. To manage through the decline in sports footwear and apparel demand, the senior leadership team is focused on cutting costs and reinvesting in marketing and innovation to drive sales. The company is starting to see green shoots for performance product innovation and has historically emerged stronger from these downturns due to benefits from a leading market position and scale.”
Overall, NKE ranks 3rd on our list of worst performing Dow stocks year-to-date. While we acknowledge the potential of NKE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.