Bill Ackman grabbed a sweet deal on Nike shares during their big dip.
According to a recent filing, Ackman’s Pershing Square purchased 3 million shares worth $229 million in the second quarter. Nike stock dropped nearly 30% in the first half of 2024.
Ackman was not new to the sports outfit brand. Pershing Square held about 5.8 million shares at the end of 2017 and sold it for a profit of around $100 million after several weeks when Nike's stock price climbed 32%, according to The Wall Street Journal.
Ackman was known as an activist investor for years. One of his most famous investments was the Canadian Pacific Railway. Between 2011 and 2016, he pushed for major changes in the company's management and operations and earned an estimated $2.6 billion in profits. But the billionaire had an epic loss of over $1 billion in a short position on Herbalife in 2018.
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In 2022, Ackman said in a letter that he pivoted to Ackman has “permanently retired” from activist short-selling, which he described as the “noisiest form of activism.”
As of August 13, Nike was Pershing Square’s ninth biggest holding, accounting for 2.17% of the portfolio, according to Whale Wisdom.
Nike plunged after struggling sales
Nike’s (NKE) fiscal Q4 earnings caused the company to experience its biggest one-day drop since 1980. After reporting a sales miss on June 28, Nike stock tumbled 20% to a low of $75.37 per share.
Nike’s quarterly earnings per share beat analysts’ forecast, but revenue missed. The company earned $1.01 a share, compared with 83 cents expected. Revenue of $12.61 billion fell short of the anticipated $12.84 billion. That was a decrease of 2% from the previous year's $12.83 billion.
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For fiscal 2024, Nike reported sales of $51.36 billion, flat from the previous year. This marks the company's slowest annual sales growth since 2010, excluding the impact of the COVID-19 pandemic.
Nike also revised its outlook for fiscal 2025, now expecting a mid-single-digit decline in sales, compared with analysts' expectations of a 0.9% increase.
The company said the adjustment is caused by a decline in lifestyle sales, increased macro uncertainty, and worsening foreign exchange, “particularly in Greater China, where brick-and-mortar traffic declined as much as double digits versus the prior year.”
Nike expects the current quarter's gross margin to align with its full-year guidance of mid-single-digit growth, as they anticipated a boost from the Paris Olympic Games.
Analyst says there might be a Nike CEO change
Gordon Haskett's head of event-driven research, Don Bilson, said on August 14 that Nike could consider replacing CEO John Donahoe with former Deckers Outdoor CEO Dave Powers, given the positive market response to Starbucks's hiring of Chipotle CEO Brian Niccol.
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"Similar to Niccol, Powers has put up video game numbers in recent years," the analyst wrote in a research note. But he also highlights that, unlike Starbucks, Nike's board is dominated by a single individual, Phil Knight, which reduces the likelihood of activist influence.
Analysts revamped their rating and price target on Nike after it posted a revenue miss.
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JPMorgan downgraded Nike to neutral from overweight with a price target of $83, down from $116.
The analyst was concerned about the company’s Q4 financial results and warned investors of an "elongated timeline" for Nike to reaccelerate revenue growth amid a global macro backdrop.
Oppenheimer analyst Brian Nagel maintained an outperform rating and $120 price target on Nike following its Q4 earnings report.
The analyst described Nike’s Q4 earnings as “the last bad quarter” and “healthy clearing event" and believed that Nike would "fuel an even stronger recovery at the company, as cyclical pressures ease."
Nike stock traded at $82.5 on August 15.
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