Nike (NKE +1.74%) stock plunged on Wednesday after a disappointing third-quarter earnings report, but the stock was already slumping heading into the report.
While the broad market was down sharply last month due to the Iran war, Nike fell even further, giving up 15% according to data from S&P Global Market Intelligence.
There wasn't much major company-specific news out on Nike, and the stock instead moved like a levered S&P 500 fund last month. However, that makes sense given that Nike is one of the biggest consumer discretionary companies in the world, and it has a lot to lose from a global recession, should the spike in oil prices and turmoil from the war cause one.
Are investors giving up on Nike?
Nike has been in the middle of a turnaround since CEO Elliott Hill took over a year-and-a-half ago, but it's also plagued by challenges outside of its control like tariffs and a weak economy in China.
In addition to the bearish sentiment around the war in Iran, there was some analyst chatter and news about the sportswear giant. On March 5, Nike said it was making organizational changes, including layoffs, and that it would take a $300 million severance charge.
Rumors also circulated that Nike could be getting ready to sell Converse, as BNP Paribas speculated that the $300 million in charges was related to plans to exit the Converse business. Nike has not given any indication it plans to sell Converse, though Converse sales have been plummeting for several quarters now.
Finally, Nike also got some bullish analyst commentary as Barclays upgraded the stock to overweight on its operational progress, and Jefferies noted that strong results from Dick's Sporting Goods bode well for Nike, and it maintained a buy rating on the stock with a $110 price target.
A Reuters report at the end of the month also called out Nike's struggles in China, noting that it's suffering from operational missteps as well as domestic competition and a weakening consumer.
Image source: Getty Images.
What's next for Nike
After falling another 15.5% on its earnings report on Wednesday, Nike stock continues to plumb new depths. Its market cap has now fallen below $70 billion.
Profits have fallen sharply in recent years, meaning that the stock still isn't cheap according to conventional valuation metrics. At this point, the company will need to return to profit growth in order for the stock to start to recover.
