Blue chip stocks represent large, stable companies with decades of success. But that doesn’t mean they are immune to the same market forces that every business faces. Nike has been facing some real headwinds lately, with its stock down by more than a third so far this year. Has the company fallen off a cliff, or is this just a temporary blip? Should you buy the dip? Let’s take a look.
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What's New at Nike?
Nike’s biggest issue right now is its declining sales. The company says that it’s facing particular challenges in the Chinese market, and its overall projections call for a slight dip in sales for the full fiscal year. Consumers worldwide have been feeling the pain of inflation, and Nike is a premium brand. An overall pullback in discretionary spending is hitting a lot of premium brands hard, not just Nike.
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What the Analysts Are Saying
There are definite reasons to be optimistic about Nike’s future. The company has a nearly encyclopedic knowledge of branding, and its celebrity partnerships reach back more than 40 years. It’s also leaned heavily into digital marketing in recent years, building a subscriber base for its various apps that numbers in the hundreds of millions. Nike is working on shoring up its direct-to-consumer sales, bypassing inefficient brick-and-mortar retailers as much as possible.
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Nike may continue to face trouble in the coming months or even years, depending on whether it can keep its brand fresh and relevant for a new generation. But its willingness to lean into the digital space, as well as its ever-changing lineup of celebrity partners, should go a long way. Nike stock is currently trading at a price-to-earnings (P/E) multiple of just 19, making it a potentially excellent buy for patient, long-term investors.
Lisa Fritscher does not have positions in NKE. Stocks.News does have positions in NKE.
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