This Dow stock is breaking down and it's time to get out, trader warns

  • Nike looks poised to fall in the short term as it faces increased competition, Cowen's David Seaburg says.
  • The company is set to report quarterly earnings later this month.

Nike, once considered a brand that could withstand a broadly struggling retail landscape, is now a stock investors should shy away from in the short term.

That's the message from David Seaburg, Cowen & Co.'s head of sales and trading.

"I think Nike's under the microscope, and obviously we're seeing what's happening with retail across the board. Nike was immune to that for a period of time, with a strong brand, but they've got competition now, and I think Adidas is really going to knock them out here," Seaburg said Monday on CNBC's "Trading Nation."

He added: "It's a fine stock, and I think over the long term they'll figure things out. But short term, there are some issues."

Seaburg pointed to Foot Locker's disappointing earnings report last month in which the shoe store blamed weak sneaker sales; Foot Locker shares fell 16 percent on the report.

Additionally, Adidas appears to be taking market share from Nike in North America, Seaburg said, forecasting shares of Nike could trade down to the $47 to $48 range, implying between about 9 and 11 percent of downside from current levels. Adidas has risen a little more than 5 percent this year as Nike has advanced nearly 4 percent in the same time.

"I wouldn't be jumping in here," he said of Nike, but added: "It's not a name that I'm saying you should be out there aggressively shorting." Still, he said, Adidas is a better pick than Nike.

On the other hand, Washington Crossing Advisors portfolio manager Chad Morganlander just purchased Nike stock, as he sees long-term growth potential. The company could see a soft quarter when it reports earnings later this month, but he thinks that's too shortsighted.

"The key driver of growth is going to be the emerging markets," Morganlander said, adding that he sees substantial growth potential there over the next five to 10 years.

Morganlander added that the company is "virtually debt-free," and investors should expect to see an increasing dividend in the longer term. His bullish thesis lies largely in what he says is its global growth potential.

Analysts, on average, give Nike a bullish price target of $60.91, according to FactSet data. In a recent note, Piper Jaffray senior research analyst Erinn Murphy lowered her price target. She said the "brand's innovation pipeline has paused" and competition remains "fierce."

Nike reports quarterly earnings on June 29, and most analysts are expecting earnings of 50 cents per share.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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