Nike has a ‘much better risk-reward’ than the market believes

CNBC’s Jim Cramer on Tuesday said that Nike stock is more investable than Wall Street might believe, even after a mixed quarter.

“I’m not going to tell you this was a great quarter. … But, and this is a big but, I don’t think the results were as bad as today’s 7% decline [suggests],” the “Mad Money” host said. “The long-term story remains intact,” he continued.

“I think the downside risk is baked into the stock, and any potential upside is absolutely not. That doesn’t necessarily mean Nike’s a screaming buy here. But I see something with much better risk-reward than it’s getting credit for, and I would indeed start a position tomorrow if it were to go down from here,” he added.

Nike reported an earnings and revenue beat in its fourth quarter, based on a survey of analysts by Refinitiv. The company said it expects first-quarter revenue to be flat or have a slight increase from the year before, and projects its full-year revenue to grow by low double-digits.

The company is facing a number of headwinds, including supply chain snarls, Covid lockdowns in China and wavering consumers in the U.S.

Total sales fell in North America and suffered a bigger drop in Greater China, which saw total sales tumble 19% from a year earlier. CEO John Donahoe said in Nike’s earnings call that the company is “taking a medium- to long-term view, and we’re as confident today as we ever have been.” 

“At the moment, Nike’s biggest problem is China. But the China commentary was …  more bullish than not,” Cramer said.

He added that while analysts have cut price targets for Nike, the lowered targets represent a change in the market that is bigger than the company.

“Last week, I told you that the earnings estimates in the aggregate were too high and needed to come down before the market could find a sustainable bottom. This is what that looks like,” he said.

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