Nike is getting booted from the S&P 100 index of large-cap companies on Sept. 21 due to its low market valuation of about $53 billion. Could the sneaker giant soon get kicked out of the Dow Jones Industrial Average too?
The Dow, unlike S&P indexes, is price-weighted. And there's a case to be made that Nike no longer deserves to be one of the 30 members of this blue chip group either. Shares now trade for around $36, the lowest in the DJIA by far. Nike, which has been a Dow member since 2013, makes up just 0.4% of the Dow's overall weighting according to Dow Jones Market Data. The second smallest stock in the Dow 30 is Coca-Cola, with a price of about $88 and a weighting of 1%.
Nike's stock price is below what Verizon and Dow Inc. were trading at when they were removed from the Dow Jones Industrial Average this June and in November 2024, respectively. Both were hovering in the high $40s when those index changes were announced. (Alphabet replaced Verizon while Sherwin-Williams was added after Dow Inc. was let go.)
But two other recent Dow ousters, Walgreens Boots Alliance and Intel, had even lower stock prices at the time of their removal. Each was trading in the low $20s when they were replaced in 2024 by Amazon.com and Nvidia respectively. (Walgreens went private last year.)
S&P Dow Jones Indices had no comment about speculation that Nike could be removed from the Dow. Nike wasn't immediately available for comment.
But Wall Street is growing increasingly nervous about what lies ahead for Nike, regardless of whether or not it remains in the DJIA. Twenty-six analysts rate Nike stock a Hold and five have it a Sell compared with just 12 Buy recommendations, according to FactSet.
UBS analyst Jay Sole wrote in a report Thursday that Nike's upcoming earnings report on Oct. 1 is likely to be bleak.
"Nike's global sales growth trend has deteriorated over the last 3 months," Sole wrote, adding that he expects earnings to miss consensus forecasts and that the outlook for the second quarter will be far below current estimates.
"Sentiment is bearish, yet our conversations with investors suggest the market underestimates the magnitude of the downward [earnings per share] revisions," Sole wrote.
So what would happen to Nike's stock if it is removed from the DJIA? Recent history paints a mixed picture.
Intel has soared nearly 320% since it was kicked out of the Dow. The semiconductor company has found new life thanks to the artificial-intelligence boom. But Dow Inc.'s shares have fallen 40% since November 2024. Verizon's stock is up 5% since late June while the Dow is down slightly.
Nike lacks a clear positive catalyst though. After all, Nike isn't the only sneaker company that's struggling. Adidas shares are down more than 15% this year. HOKA owner Deckers Outdoor has tumbled 25% while On Holding has plummeted nearly 45%.
Last month's weak earnings from Dick's Sporting Goods, which also owns Foot Locker, highlighted just how tough the environment is for sneaker sellers. And it doesn't look like trends are improving anytime soon. Analysts are forecasting that Nike's year-over-year sales will drop for both this quarter and its next fiscal quarter ending in November.
There is one notable positive though. Nike's dividend yield of 4.6% is the highest in the Dow, making it an attractive option for income-hungry investors. The company's balance sheet and predicted cash flows appear strong enough to cover those payouts too.
But as long as the stock price remains in reverse swoosh mode, there will be continued questions about how much longer Nike will remain a Dow stock.
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