We are buying 150 shares of Nike at roughly $64. Following the trade, Jim Cramer’s Charitable Trust will own 1,300 shares of NKE, increasing its weighting to 2.2% from about 1.95%. Nike shares are having a rough stretch. They have been down every day over the past six sessions, hitting their lowest level since June. The sell-off has taken the stock about 7% below its previous trading level, following its much better-than-expected quarterly results reported last month. The quarter wasn’t perfect — challenges remain in Greater China, and there’s still some excess inventory in the channel. But the most important thing was seeing the clear signs of progress in CEO Elliott Hill’s turnaround plan and “Win Now” initiative. Many agreed with the momentum in the turn. Nike shares popped 6% the next day to $74.20. In the following days, several analysts upgraded their ratings to buy. But the stock has been trending lower ever since, as concerns about the health of consumer spending have hurt many stocks in the category. Crushing Nike was also a sell-off in its main competitor Adidas, which fell 10% on Wednesday after its quarterly sales missed estimates, with North America being its slowest performing region. Although the market viewed Adidas’s weakness as bad for Nike, analysts at Jefferies have a much different take. They wrote in a note Wednesday that Adidas’s “fading momentum” in North America is a result of Nike’s recovery taking shape. “With NKE’s order book continuing to grow YoY, we see retailers increasingly re-engaging with the brand, an encouraging trend that should translate into expanded shelf space,” Jefferies said. Jefferies has a buy rating and $115 price target on Nike. It’s also on its “Franchise Pick” list, which is equivalent to a best ideas list. Jefferies’ comment about gaining shelf space in stores fits with our thesis in Hill’s turnaround plan. After years of favoring its own direct-to-consumer channel and ignoring its key retail partners, Hill has reengaged with companies like Dick’s Sporting Goods and Foot Locker. This pivot paid off last quarter with North America wholesale returning to sales growth, and we see Hill’s broader strategy working in the quarters ahead. (Jim Cramer’s Charitable Trust is long NKE. See here for a full list of the stocks.) As a subscriber 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 trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
We’re snapping up this out-of-favor stock that’s turning things around
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