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Are Supply Chain Disruptions Worth Concern? By TipRanks


© Reuters Nike Stock: Are Supply Chain Disruptions Worth Concern?

Nike (NYSE:) stock finds itself down just over 9% from its peak hit back in early August.

The shares of this athletic apparel company could slide further but I think the near-correction to the name offers a fantastic entry point. This stock has my full support. (See NKE stock charts on TipRanks)

The company is still firing on all cylinders, but up ahead are some potential headwinds that are outside of Nike’s control. Undoubtedly, supply chain disruptions in a variety of industries continue to be caused by the COVID-19 pandemic.

You may have heard about the ongoing chip shortage that has been going on for months. It continues to negatively impact many hardware manufacturers today. After an amazing first half of 2021, the factories in Vietnam are shutting down. It’s now that apparel retailers in hot spots like Nike will be affected.

Nike Runs into Supply Chain Disruptions

Just how bad are the supply chain disruptions in Vietnam? This was enough to prompt the first of what may be several analyst downgrades. It is also a concern that disruptions like this could have a negative impact on future quarterly earnings results.

Camilo Lyon, BTIG, downgraded NKE stock from a Hold to reflect the adverse impact on the Vietnam situation.

With its incredible momentum in the past quarter, and continuing strength in direct-to-consumer business (D2C), Nike appeared unstoppable. It’s disappointing for shareholders that the company’s incredible run is ending.

The Vietnam COVID-19 crisis is getting worse. There aren’t any easy ways to stop it. Nike is a great example of a company capable of pivoting in the face supply chain disruptions. Nike might be able to adapt just as well as Apple (NASDAQ) in its response to the chip shortage.

We are getting closer to Christmas and production cuts may mute Nike’s fourth quarter. However, I believe that Nike will continue where it left off after the disruptions have resolved, regardless of how long it takes.

Therefore, any dip in NKE stock should be seen as a buy opportunity and not as a way to profit from its sales momentum.

Wall Street’s Take

According to TipRanks’ consensus analyst rating, NKE stock comes in as a Strong Buy. From 25 analysts ratings there are 21 Buy recommendations. Three Hold recommendations and one Sell recommendation.

The average Nike price target is $187.26. The average analyst price target for Nike is $187.26.

The bottom line on Nike stock

Nike is a magnificent company whose long-term fundamentals have never looked better. D2C is expected to continue paying huge dividends over the next several years.

A sneaker shortage might be on the horizon for holiday season. However, Nike seems to be experiencing temporary headwinds. When such headwinds pass, the company will resume normal operations and investors can be sure that the company will continue to move forward with high-demand products.

Nike may have another great quarter in its hands before the impact of the looming closures on its factories is fully felt by consumers.

Disclosure: Joey Frenette held shares in Apple at publication.

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