The 2023 market rally has been really rewarding to the broader basket of stocks, but not all beaten-down stocks have been off to the races this year. Certain consumer-facing firms — like NKE and PTON — have felt the pinch from people putting their wallets away more than others. Going into the new year, it’s unclear as to when consumers will have enough disposable income to justify high-end runners and stationary bicycles again.
Undoubtedly, strong brands are still important. It’s just that some brands are more resilient in the face of economic slowdowns than others. Fans of such brands may wish to consider buying shares while prices are low, even if they’ve been relative laggards in the consumer scene of late.
Therefore, in this piece, we’ll use TipRanks’ Comparison Tool to check in on a pair of sporty companies that lost their way and are still struggling to gain ground after their respective multi-year sell-offs.
Nike (NYSE:NKE)
Nike stock is sitting down more than 8% year-to-date, as its relief rally off its October 2022 multi-year lows faltered. If you haven’t kept up to date with Nike, it may be a shocker to see the company behind the Shoe Dog book in the doghouse. Undoubtedly, Nike and its legendary swoosh logo represent arguably the strongest brand in the entire apparel scene.
So, whenever shares sag for a prolonged period, it tends to be a wise idea to take the role of contrarian, even if nobody else is willing to. Though short-term pain could come before any sort of gain, Nike is more than able to land on its feet. And for that reason, I’m staying bullish on the stock as we sail into a very hazy 2024.
Nike’s been quite the drag on retail in recent months, sinking just north of 30% from 52-week highs to 52-week lows. Undoubtedly, there have been signs of life in the apparel scene, with footwear rival Skechers (NYSE:SKX) about to make new highs. And while Skechers and other players in the sneaker space may be gaining ground, I don’t think it’s at all sustainable to think Skechers will continue to outrun Nike once the economic landscape normalizes.
At the end of the day, Nike has a brand that’s strong enough to lift the firm and its stock out of the gutter once the consumer heals from recent years of hefty inflation and stagnant wage growth. Indeed, sneakerheads (those who collect, buy, and sell shoes) probably haven’t switched to collecting the latest and greatest Skechers shoes. They still hold Nike sneakers in high regard, and many will be back to buying the latest Nike drops once their budgets are in better order.
For now, Nike is a more economically sensitive footwear firm that will chop based on where the consumer sits. Over the long run, I expect innovation and the direct-to-consumer (DTC) channel to act as longer-term growth drivers for the firm. With some of the best innovations (think its Flyknit lightweight fabric and React cushioning) out there and a robust digital presence, the company is well-positioned to fly once the economic coasts are cleared.
Recently, Evercore initiated coverage on Nike with a Buy rating and a $124.00 price target, entailing around 15% upside.
What’s the Price Target on NKE Stock?
Nike’s a Moderate Buy, according to analysts, with 18 Buys and 11 Holds assigned in the past three months. The average NKE stock price target of $118.08 implies 9.7% upside.
Peloton (NASDAQ:PTON)
The Peloton bubble has burst, with shares now down over 96% from their late-2020 all-time high, just north of $171 per share. Peloton is probably never going to see new highs ever again, but that doesn’t mean the stock is dead money as shares sink further with every missed number and lost subscriber.
Though Peloton lost a notable bull (Deutsche Bank (NYSE:DB)) just a few weeks ago, a handful of analysts (five out of 19) are sticking with PTON despite weakening fundamentals. Even as a speculative way to play a recovery in consumer spending, though, I’m hesitant to be anything more than neutral on the stock as its rocky ride continues.
Looking ahead, things don’t look all too bright for Peloton as economic conditions continue to wane. Whether we’re talking about negative cash flows or declining sales, it seems like Peloton is destined to tumble into an endless abyss. That said, there is some appeal to the brand. And the weak state of the macro environment bears a huge chunk of the blame for the recent wave of weak numbers.
Additionally, any “ugly” stock can be a great bet if you nab a price that’s low enough. At these depths, it’s unclear as to whether it makes sense to pay a mere $5 and change per share. Personally, however, I’d rather just have my five bucks until Peloton can prove to investors and analysts that it’s worth the upgrade.
While the company has taken steps to reduce its cash bleed, it really needs the economy to turn if it wants to pedal higher again. Otherwise, it’s very hard for anybody, even at-home fitness junkies, to justify picking up the latest Peloton innovation or even renewing a Peloton subscription, for that matter.
What’s the Price Target on PTON Stock?
Peloton’s a Hold, according to analysts, with five Buys, 12 Holds, and two Sells assigned in the past three months. The average PTON stock price target of $7.54 entails 43.1% upside potential.
The Bottom Line
If you’re in the market for a sporty play, Nike stock seems like a far better bet than PTON, given the stronger brand and fundamentals, which still look robust in the face of macro pressures. For now, the average price target suggests PTON stock as the higher-upside bet, but you’ll bear more risk by reaching for the greater expected return. Personally, I wouldn’t risk overreaching with a name like Peloton, given its extreme cyclicality.
