2024-07-03 14:47:05 ET
Summary
- Nike stock experienced a significant rise in value over four decades, leading to a challenging sell recommendation despite investor sentiment.
- Despite initial resistance, subsequent sell calls on Nike stock proved prescient, as the stock corrected nearly -60% from its highs.
- Current valuation analysis suggests that Nike stock remains overvalued, with a 10-year earnings CAGR estimate below 5%, warranting a "Hold" rating.
Introduction
I view my job as a stock analyst as one whose primary responsibility is two-sided. One side is to share stock ideas with readers that have a high probability of producing great returns, while the other side is to warn about risky stocks that have a high probability of producing poor returns. This second responsibility remains, even if it would be more lucrative for me as an analyst to be bullish all the time on stocks that have a long history of success (investors tend to like to have their winning investment ideas reinforced rather than challenged). Yet, I feel an even deeper responsibility to warn investors when a stock has produced staggeringly great returns as Nike ( NKE ) did for four decades because so few others are willing to issue those types of valuation warnings....
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For further details see:
Nike Stock Implosion: A Case Study On Why Valuation Matters