Please ensure Javascript is enabled for purposes of website accessibility

Why You Should Buy Nike Stock After Colin Kaepernick Ad

Nike stock got roughed up on Monday after the company unveiled a controversial new Colin Kaepernick ad campaign. And that could be an ideal entry point.

You may not agree with Nike, Inc.’s (NKE) decision to build an advertising campaign around polarizing former football player Colin Kaepernick. But Wall Street’s immediate reaction (overreaction?) to the Swoosh’s controversial move is creating a buying opportunity in Nike stock.

Nike Stock Now

Put politics aside for a second and just look at this one-year chart of Nike stock:

A one-year chart of Nike stock, including Monday's Kaepernick-fueled dip.

That’s a 50% gain in 12 months, and it includes Monday’s 2.9%, Kaepernick-fueled sell-off. What was an $83 stock two weeks ago is now an $80 stock (roughly), bouncing off of mid-August support and still comfortably above its 50- and 200-day moving averages, as it has been since April.

[text_ad use_post='129627']

Now, there are two caveats to this. If the current sell-off takes NKE below its 50-day moving average (currently $78), it could mark an intermediate-term rest period—meaning you may want to hold off until the stock rights the ship. And second, if earnings from the current quarter take a noticeable dip and fall well short of expectations, that would be damning evidence that Nike’s Kaepernick decision had driven away more consumers than it attracted. We won’t have the answer on the earnings front until late December, though earnings for the most recent quarter (ended August 31) are due out September 25, and it’s possible the conference call could reveal early hints of any blowback.

Without getting into the politics of the company’s decision to prop up Kaepernick (not touching that one!), I believe that this Nike sell-off will be little more than a blip. For one, NKE has been such a strong growth stock for so long, that it’s hard for any one decision to irrevocably reverse that trend.

Second, the upcoming earnings report should be good, with analysts expecting 8.8% earnings growth and 9.3% sales growth. And third, Nike has been doing business for a long time. There’s a reason they’re the biggest, most recognizable sports apparel company in the world. They didn’t make this decision blindly. Yes, it’s a risk, but you can be sure it was a very calculated risk. Management is betting that the Kaepernick advertising campaign will bring in more customers than it drives away.

This is a company that hasn’t shied away from controversy over the years. Remember Charles Barkley’s infamous “I am not a role model” commercial from the ‘90s? Generally speaking, that didn’t stop people from buying Nike sneakers, t-shirts or other athletic wear. In the long term, I doubt the Kaepernick ad campaign will derail Nike either.

There could be some short-term pain, as many Americans have vowed to boycott Nike as a result of its decision (some extremists are burning their Nike gear, but that doesn’t cost Nike a dime). But I doubt a Colin Kaepernick advertising campaign will sink Nike or do long-lasting damage to its brand.

Ignore Politics, Buy NKE

You may dislike everything Colin Kaepernick stands for (or, more accurately, kneels for). And Nike’s decision to be in bed with Kaepernick may turn you off from buying Nike stock. But at Cabot Wealth Network, we try and take politics and emotion out of the equation. We prefer to look at stock charts and the bigger picture. And both of those still look pretty good.