While shares of the athletic apparel giant could sag further, I’d argue that the near-correction in the name provides a great entry point. I am bullish on the stock. (See NKE stock charts on TipRanks)
The company is still firing on all cylinders, but up ahead are some potential headwinds that are outside of Nike’s control. Undoubtedly, the COVID-19 pandemic continues to cause supply chain disruptions across a wide range of industries.
You’ve probably heard of the chip shortage for many months on end. To this day, it still negatively affects many hardware makers. With factory shutdowns in Vietnam, it’s the red-hot apparel retailers that look next in line to lose their step after an incredible first half to 2021.
Nike Runs into Supply Chain Disruptions
Just how bad are the supply chain disruptions in Vietnam? Apparently bad enough to bring forth the first of what could be a handful of analyst downgrades, with worries that such disruptions could impact coming quarterly earnings results.
Camilo Lyon of BTIG downgraded NKE stock to a Hold over the negative impact of the situation going on in Vietnam.
Nike seemed unstoppable, with unbelievable momentum exhibited in the last quarter and continued strength in its direct-to-consumer (D2C) business. So, it’s a bit disheartening for shareholders to hear the company’s epic run will be reduced to a walk.
There are no easy solutions to combat the worsening COVID-19 crisis going on in Vietnam. Still, if there’s a company that can pivot in spite of supply chain disruptions, it’s Nike. Arguably, Nike could adapt as effectively as Apple (NASDAQ:AAPL) did in response to the chip shortage.
As we inch closer to the holiday season, production cuts could mute Nike’s fourth quarter. Regardless, I do think that Nike will pick up where it left off once the latest round of disruptions resolve themselves, however long this may take.
As such, any worsening of the latest dip in NKE stock ought to be viewed as more of a buying opportunity, and less of a chance to take profits after its recent sales momentum.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, NKE stock comes in as a Strong Buy. Out of 25 analyst ratings, there are 21 Buy recommendations, three Hold recommendations, and one Sell recommendation.
The average Nike price target is $187.26. Analyst price targets range from a low of $168 per share, to a high of $221 per share.
The bottom line on Nike stock
Nike is a magnificent company whose long-term fundamentals have never looked better. I expect D2C to pay huge dividends for many years to come.
Although a sneaker shortage could be in the cards for the holiday season, I do think Nike is experiencing a temporary bout of headwinds. Once such headwinds fade, it’ll be off to the races again, and investors can expect the company to keep moving forward with products that will be in very high demand.
As consumers look to buy now, rather than wait for the holidays to roll around, Nike could have another epic quarter up its sleeves before the full impact of looming factory closures works its way into the results.
Disclosure: Joey Frenette owned shares of Apple at the time of publication.
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