As the Nike stock implodes, is it safe to buy the dip or sell the rip?

Nike stock continued its strong downward trend, reaching its lowest level since September 2024, as investors remained impatient about its turnaround strategy. NKE dropped to $38.94, down by over 78% from its highest point on record. This sell-off may continue in the foreseeable future as investors remain cautious.

Nike stock price technicals point to more downside

The weekly chart shows that the NKE stock has been in a strong sell-off in the past few years, turning one of the most popular blue-chip companies into a fallen angel. It has recently dropped below the important support level of $52.53, its lowest level in April last year. 

The stock remains below all moving averages, a sign that bears remain in control. Worse, the Relative Strength Index (RSI) has moved to 32, meaning that it is not yet in the oversold level and has more downside to go.

The Average Directional Index (ADX) has jumped to 31.55, its highest level since August 2024, a sign that the downward momentum is continuing. Therefore, the path of the least resistance for the stock is bearish, with the next key target to watch being at $25. 

The bearish outlook for the stock will become invalid if it jumps above the crucial resistance level of $52.53. Such a move will point to more gains, potentially to $100. 

NKE stock chart | Source: TradingView

Concerns about Nike’s turnaround continues

Nike, a company that has long dominated in its respective industries, has come under intense pressure because of the actions the management took a few years ago, and its turnaround is taking longer than expected to bear fruit. For example, the company decided to focus on a direct-to-consumer approach, reducing the prioritization of its wholesalers.

Now, under Elliot Hill, the company has worked to implement a turnaround strategy. Its “Win Now” approach includes measures like cleaning up inventory, intensifying its sports business, rebuilding its wholesale partnerships, and increasing product innovation. 

There are now concerns that the turnaround strategy is taking longer-than-expected to achieve the desired results. Its most recent results showed that its revenue slipped to $11 billion, with its NIKE Brand remaining flat on a reported currency basis. Its wholesale revenue rose by 4%. Its gross margins rose by 890 basis points to 49.2%, mostly because of the IEEPA tariff refunds, which will be about $986 million.

Nike’s revenue for the last quarter is expected to have dropped by 2.90% to $11.38 billion, with the annual figure expected to fall by another 1.57%. Buying Nike stock is a bet that the management will execute its turnaround strategy well. 

Analysts are relatively pessimistic about the company, with JPMorgan’s Matthew Boss slashing the rating from neutral to underweight. He cut the target from $47 to $40. Rothschilds and BNP Paribas have a sell and underperform ratings, respectively.

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