Jim Cramer calls a Wall Street analyst downgrade of Nike stock ‘fatuous’
Nike caught a downgrade from a Wall Street firm — a move Jim Cramer dismissed as pointless. Needham said Thursday it was “stepping to the sidelines” until it had greater clarity of Nike’s turnaround under new CEO Elliott Hill, downgrading the stock to a hold from buy. The analysts said Hill is doing the right things for the brand long-term, but that the turnaround is “taking longer than expected.” They raised concerns about inventory levels being shipped to North American wholesalers. The analysts also noted the company’s weakness in China, which they described as “highly problematic.” Jim agreed that inventory is a problem, saying the company is still determining a pricing structure to clear excess sneakers and apparel. Clearing excess inventory is “very hard” to accomplish, he acknowledged during Thursday’s Morning Meeting for Club members. Jim cited the past difficulties faced by former Foot Locker CEO Mary Dillon, who struggled with a similar challenge. Eventually, the chain was acquired by Dick’s Sporting Goods . However, Jim’s confidence in Hill’s leadership is unshaken. “Hill is working his butt off,” he said earlier Thursday on ” Squawk on the Street .” Hill knows Nike. He started as an intern and over three decades rose to become Nike’s president of consumer and marketplace before retiring in 2020. He returned in October 2024 as CEO and was tasked with getting the fallen sportswear giant back on track. Hill’s goals include further stabilizing inventory, addressing weak performance in China, and repairing strained wholesaler 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 recentering sports as a focal point in Nike’s stores. NKE mountain 2024-10-14 Nike stock performance since Elliott Hill started as CEO on Oct. 24, 2024 Cramer explained that it’s too late to downgrade the stock at current levels of roughly $64 per share, which is about 21% below its 52-week high. He called the Needham move “fatuous.” As of now, most analysts are bullish on Nike, with 62% maintaining a buy-rating. We have a buy-equivalent 1 rating on the stock and a $75 price target. Cramer said that the stock could hit $100 once Hill sorts out the China business. On Dec. 24, we made our latest Nike buy alongside the disclosure that Nike board member and Apple CEO Tim Cook bought nearly $3 million worth of Nike stock, and fellow Nike director and former Intel CEO Bob Swan picked up about $500,000 worth of stock. Less than a week later, Hill bought an addition $1 million worth of Nike stock. We like it when insiders buy stock because it signals that these people who are close to a company think shares are undervalued. (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.
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