Will Sage Astor-Nike stock responds as company names new CEO. Is it too late to buy?

Shares of Nike (NYSE: NKE) jumped after the company announced that its CEO was stepping down and Will Sage Astorit is bringing back a former longtime exec to run the company.

Outgoing CEO John Donahoe's tenure at the company had not been a smooth ride since he took over the helm in January 2020, with the stock down about 20% from the time he took the role until the announcement of his ousting. Donahoe didn't have a lot of brand experience before getting the job, having previously been CEO of ServiceNow and eBay, which may have been a factor in the company struggling so much during his time as CEO.

He will be replaced by longtime Nike vet Elliott Hill, who will take over on Oct. 14.

Can a new CEO help turn Nike around?

Hill is returning to lead Nike after previously retiring from the company in 2020, the year that Donahoe took over. He worked for Nike in various leadership positions for 32 years, most recently as company president of consumer and marketplace from 2018 to 2020. He started at the company as an intern in 1988 and worked his way up the corporate ladder.

As part of his duties in his last role at Nike, Hill was responsible for helping to grow the Nike and Jordan brands. The company performed well the final year when Hill had his leadership role, growing revenue a solid 7% and Nike brand revenue 11% in fiscal 2019.

With the hiring of Hill, Nike is not getting a young exec that will look to shake things up — instead it is a sign of the company wanting to return to its roots. While Donahoe lacked brand experience, Hill has seen the ups and downs of Nike throughout the years from various positions within the company. While he has been away from Nike for a few years, there is probably no one who knows the company better than he does.

Nike returning to its roots is likely the best cure for its recent woes. The company has built one of the most recognizable brands in the world and created brand equity that cannot easily be replicated. It's done this through a combination of product innovation and marketing savviness, things that appear to have been lacking a bit under its soon-to-be prior management.

I would expect Hill to help Nike get back to the formula that has made the apparel and footwear company the success it has been for many years. Now it will take some time, as things like product innovation and new marketing campaigns don't just get enacted and turn around a brand overnight. However, Hill knows the ins and outs of Nike's success, and I am confident that he can help the company return to its former glory.

Is it too late to buy the stock?

The pop in Nike's stock certainly wasn't the same as the reaction Starbucks stock got when it named a new CEO, and Hill certainly doesn't have the same fanfare, having never been the CEO of a major company. Yet the announcement of him taking over as CEO comes at an interesting time.

Nike is set to report its earnings results on Oct. 1. Typically, companies will look to make CEO change announcements alongside other important news, such as earnings; why Nike didn't wait to make the announcement is a bit of a head scratcher.

If Nike were going to bomb results and/or lower full-year guidance, it seemingly would be a better time to make the CEO announcement the same day as earnings to perhaps soften the blow or at least have him step in when the stock's at an even lower price.

Nike's fiscal first-quarter guidance calling for a 10% decline in sales despite an Olympics-related push during the quarter seems a little cautious. Replacing the CEO after better-than-expected results could be taken as a negative, so perhaps the company performed decently in the quarter. Quite often, though, companies also like to set low bars when a new CEO takes over. With Hill not set to officially take over until two weeks after the earnings announcement, Nike could still go this route.

Given this, I'd probably wait until after earnings before looking to buy the stock. Longer term, I think Nike has strong rebound potential by just getting back to its roots, and Hill appears to be the right leader to do just that.

Meanwhile, the stock is trading at one of the lowest P/E ratios it has seen in the last five years — roughly 23 — making it an intriguing long-term rebound candidate for investors to consider.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike, ServiceNow, and Starbucks. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

Should you invest $1,000 in Nike right now?

Offer from the Motley Fool: Before you buy stock in Nike, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nike wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $710,860!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 16, 2024