Why Nike Shares Got Stomped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of athletic gear giant Nike (NYSE: NKE  ) sank 11% on Friday after the company's quarterly results missed Wall Street expectations.

So what: Nike's fourth-quarter profit miss was so wide -- EPS of $1.17 versus the consensus of $1.37 -- that analysts are being forced to cut their growth forecasts and price targets significantly. Management cited high product costs and easing international demand for the disappointing results, reinforcing concerns over slipping margins and cooling footwear trends going forward.

Now what: I'd look into this plunge as a possible entry point. "[We delivered] solid profit growth for the year despite some headwinds in a challenging global economy, which will continue into the next year," President and CEO Mark Parker said in a statement. "That said, NIKE is well positioned and will remain aggressive, flexible and laser-focused on the high-growth opportunities." Given Nike's still-solid revenue growth, and the likelihood of share repurchases over the next few years, now might be good time for long-term investors to get interested.  

Interested in more info on Nike? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Nike. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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10/28/2016 3:34 PM
NKE $52.05 Up +0.16 +0.32%
Nike CAPS Rating: *****