(Bloomberg) -- Battered in late June after a weak sales forecast, Nike Inc. shares have just logged their longest winning streak in more than eight years, propelled higher by a torrent of positive developments.
The athletic footwear and apparel maker’s stock is up 17% over nine days, outpacing the S&P 500 by some 10 percentage points as the market rebounded from its worst rout in two years on Aug. 5.
Sentiment around consumer companies in general got a boost after solid earnings from the likes of Walmart Inc. and Home Depot Inc. A reading on US retail sales topped estimates, helping to ease mounting concerns about the strength of the American consumer.
The shares also got a lift when Bill Ackman’s Pershing Square Capital Management LP disclosed a $229 million position in the world’s largest sportswear company on Wednesday. That helped allay some fears on Wall Street that activist investors could target Nike after its dismal annual revenue guidance — a forecast that sent the stock spiraling 20% to its biggest decline on record.
The rally extended Friday after Williams Trading analyst Sam Poser upgraded the stock to buy from sell. He said the recent rehiring of Tom Peddie as the VP of Marketplace Partners — basically Nike’s US wholesale division, according to the analyst — indicates that a change “is brewing.”
Nike’s current executives “lack brand and Nike institutional knowledge that the leaders had in 2015,” said Poser. He called the firm’s senior management “poster children for a Nike ad, ‘Winning isn’t for Everyone, am I a Bad Person?”’
Even after the latest surge, Nike shares are still down 12% from the day before its last earnings release on June 27. They remain lower by 23% this year. If the stock fails to reverse the drop, 2024 would be the third straight year of declines, a streak not seen since Nike’s initial public offering more than four decades ago.
Poser expects that poor stock performance — sparked in part by lackluster product launches and disappointing sales performance and guidance — raises the likelihood that a “C-Suite change occurs.” For that reason, he rates the stock a “buy,” even with some time before a meaningful turnaround takes hold.
“We foresee improvement in the stock price well ahead of improvements of Nike’s business, and recommend investors to be patient,” he said.
(Updates to reflect closing price)
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