Nike (NYSE:NKE) is a stock that has been struggling badly over the past year, with its shares down more than 30% during that stretch.
And the free fall is by no means over. Nike’s stock has been nosediving since it reported earnings recently and its Relative Strength Index, RSI, finished last week at 23. When a stock’s RSI falls below 30, it is considered to be oversold, which is indicative of excess selling. Nike is well beyond that threshold as investors weren’t thrilled with the company’s results or its disappointing guidance, which forecasted that sales for the current quarter would be down around the “mid-teens range.”
Things aren’t looking good for Nike as consumers scale back on spending due to rising prices, tariffs, and fears of a recession. As a result of these worries, the stock is trading around multi-year lows and the last time it was at these levels was back in 2017. The difference is back then, the stock was on the rise. This time, it’s a much different story.
But even with the drop in price, Nike is trading at an estimated 29 times next year’s earnings, which is a steep multiple for a business that is struggling with finding ways to grow its sales. Until there’s a more positive outlook for the economy and the company, investors may want to steer clear of Nike’s stock as there could still be much more room for its valuation to drop even further.
As good as a price this may seem for Nike, the fundamentals and challenging road ahead don’t suggest the stock is a deal right now.