By comparing the trend in Nike(NYSE: NKE) stock over the past few months with its trajectory during and after the Great Recession of 2008, we believe the stock has the potential to gain 17% once fears surrounding the coronavirus outbreak wane. Our conclusion is based on our detailed comparison of Nike’s performance against the S&P 500 in our interactive dashboard analysis, Comparison crisis 2007-08 vs crisis 2020: How does the Nike stock price compare to the S&P 500?
The World Health Organization declared a global health emergency in late January in light of the spread of the coronavirus. Between February 19 and April 14, Nike stock lost nearly 14% of its value (compared to a 16% drop for the S&P 500). Much of the drop came after March 6, when a rising number of coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry sparked by an increase in oil production by Saudi Arabia.
Nike stock fell because the situation on the ground changed
The drop in Nike shares is understandable, given the impact the outbreak and a broader economic downturn are likely to have on total consumption/consumer spending and the global apparel industry. Notably, the company derives most of its revenue from the United States, which has become the new epicenter of the outbreak – recording the highest number of COVID-19 cases worldwide. Plus, people just aren’t going to buy fancy or even basic clothing items. The decline was exacerbated by the cancellation of major sporting events, including the Olympics, NBA and Euro 2020, which make up a decent chunk of the company’s revenue. Additionally, Nike has temporarily closed stores outside of the Asia-Pacific region, further impacting the company’s performance. Nike also did not provide indicative figures for the fourth quarter of 2020 due to uncertainty resulting from the spread of COVID-19.
But Nike Stock witnessed something similar during the 2008 downturn.
- We see that Nike stock has moved from levels around $13 in October 2007 (the pre-crisis high) to levels around $9 in March 2009 (when markets bottomed) – this which implies that the company’s stock is down as much as 28% from its approximate pre-crisis level. – peak of crisis. This marked a lesser decline than the broader S&P index, which fell about 51%.
- Despite this, the stock rebounded strongly once the recession passed, rising 62% between March 2009 and January 2010. By comparison, the S&P rose around 48% over the same period.
Will Nike stock recover in the same way from the current crisis?
Bearing in mind the fact that Nike stock is down 16% this time around compared to the 28% decline during the 2008 recession, we can expect it to recover almost 17%. % to $102 levels once economic conditions begin to show signs of improvement. . This marks a full rally in Nike stock from $102 before the coronavirus outbreak escalated globally.
That said, the actual recovery and its timing depend on the broader containment of the spread of the coronavirus. Our Dashboard forecast of COVID-19 cases in the United States with comparisons between countries analyzes expected recovery times and possible spread of the virus.
In addition, our dashboard -28% Coronavirus crash vs 4 historical crashes builds a complete macro image. It complements our analyzes of the impact of the coronavirus outbreak on a diverse set of Nike’s multinational peers – including To guess, L brands, and Urban outfitters. The complete set of coronavirus impact and timing analysis is available here.