Why It Is Just A Matter Of Time Before Nike Stock Recovers To $100

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Comparing the trend in Nike’s (NYSE: NKE) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 17% once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of Nike’s performance vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Nike Stock Fare Compare With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. Between February 19th and April 14th, Nike stock has lost nearly 14% of its value (vs. a 16% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

 

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Nike’s Stock Has Fallen Because The Situation On The Ground Has Changed

The decline in Nike’s stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on total consumption/consumer spending and the global apparel industry. Notably, the company derives a bulk of its revenues from the US, which has become the new epicenter of the outbreak – recording the largest numbers of COVID-19 cases across the globe. Moreover, people are just not going to shop for luxury or even basic apparel products. The decline has been exacerbated by the cancellation of major sporting events, including the Olympics, NBA, and Euro 2020, that form a decent part of the company’s top line. Additionally, Nike has temporarily shuttered stores outside the Asia-Pacific region, which is further impacting the company’s performance. Nike also didn’t provide any guidance figures for Q4’2020 due to the uncertainty resulting from the spread of COVID-19.

But Nike Stock Witnessed Something Similar During The 2008 Downturn

  • We see Nike stock declined from levels of around $13 in October 2007 (the pre-crisis peak) to levels of around $9 in March 2009 (as the markets bottomed out)- implying the company’s stock lost as much as 28% from its approximate pre-crisis peak. This marked a lesser drop than the broader S&P, which fell by about 51%.
  • Despite this, the stock recovered strongly once the recession passed – rising by 62% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

 

Will Nike’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that Nike stock has fallen by 16% this time around compared to the 28% decline during the 2008 recession, we can expect it to recover by almost 17% to levels of $102 once economic conditions begin to show signs of improving. This marks a full recovery to the $102-level Nike stock was before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the coronavirus outbreak’s impact on a diverse set of Nike’s multinational peers – including Guess, L Brands, and Urban Outfitters. The complete set of coronavirus impact and timing analyses is available here.

 

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