July 20, 2024
Investors

Institutional investors may adopt severe steps after NIKE, Inc.’s (NYSE:NKE) latest 12% drop adds to a year losses


Key Insights

  • Given the large stake in the stock by institutions, NIKE’s stock price might be vulnerable to their trading decisions
  • A total of 16 investors have a majority stake in the company with 51% ownership
  • Insiders own 21% of NIKE

If you want to know who really controls NIKE, Inc. (NYSE:NKE), then you’ll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 68% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company’s market cap fell to US$164b last week after a 12% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 6.9% for shareholders. Institutions or “liquidity providers” control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in NIKE’s share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let’s take a closer look to see what the different types of shareholders can tell us about NIKE.

View our latest analysis for NIKE

NYSE:NKE Ownership Breakdown December 26th 2023

What Does The Institutional Ownership Tell Us About NIKE?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in NIKE. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see NIKE’s historic earnings and revenue below, but keep in mind there’s always more to the story.

NYSE:NKE Earnings and Revenue Growth December 26th 2023

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don’t have many shares in NIKE. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In NIKE’s case, its Top Key Executive, Philip Knight, is the largest shareholder, holding 17% of shares outstanding. With 7.1% and 6.0% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third largest shareholders.

After doing some more digging, we found that the top 16 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of NIKE

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in NIKE, Inc.. Insiders own US$34b worth of shares in the US$164b company. That’s quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public– including retail investors — own 11% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand NIKE better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Valuation is complex, but we’re helping make it simple.

Find out whether NIKE is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent. View more
Accept
Decline