Jim Cramer calls a Wall Street analyst downgrade of Nike stock ‘fatuous’
Nike downgraded a company on Wall Street; A move that Jim Cramer found pointless. Needham said Thursday that Nike is “stepping aside” and placing the stock on hold at buy until its turnaround under new CEO Elliott Hill becomes clearer. Analysts said Hill was doing the right things for the brand in the long term, but the turnaround “took longer than expected.” They expressed concern about stock levels being sent to North American wholesalers. Analysts also described the company’s weakness in China as “highly problematic.” Jim acknowledged that inventory is an issue, saying the company is still trying to determine a pricing structure to clear excess sneakers and clothing. He acknowledged during Thursday’s Morning Meeting for club members that it was “very difficult” to clear excess stock. Jim touched on past challenges faced by former Foot Locker CEO Mary Dillon, who struggled with a similar challenge. Eventually the chain was purchased by Dick’s Sporting Goods. But Jim’s confidence in Hill’s leadership remained unshaken. “Hill is working his ass off,” he said on “Squawk on the Street” earlier Thursday. Hill knows Nike. He started as an intern and became Nike’s president of consumer and marketplace for more than three decades before retiring in 2020. He returned as CEO in October 2024 and is tasked with getting the fallen sportswear giant back on track. Hill’s goals include further stabilizing inventory, addressing weak performance in China and repairing wholesale relationships that suffered under former CEO John Donahoe’s direct-to-consumer strategy. At the heart of Hill’s “Win Now” strategy is product innovation and making sports a focal point at Nike stores. NKE mountain 2024-10-14 Nike stock performance since Elliott Hill took over as CEO on October 24, 2024 Cramer explained that it was too late to downgrade the stock to current levels of about $64 per share, which is about 21% below its 52-week high. He called Needham’s move “stupid.” As of now, most analysts think Nike is bullish, with 62% maintaining a buy rating. We have a buy-equivalent 1 rating on the stock and a $75 price target. Cramer said the stock could reach $100 if Hill resolves the China business. On December 24th, we made our latest Nike acquisition, alongside the announcement that Nike board member and Apple CEO Tim Cook had purchased approximately $3 million worth of Nike stock, and Nike director and former Intel CEO Bob Swan had purchased approximately $500,000 worth of shares. Less than a week later, Hill purchased an additional $1 million worth of Nike stock. We like it when insiders buy shares because it signals that people close to the company think the shares are undervalued. (Jim Cramer’s Charitable Trust is a long NKE. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
