Is Nike a buy or sell in December?

Nike (NYSE: NKE) shares have advanced from $121 above $138 since the beginning of November, and the current price stands around $135. This stock has been one of the market’s biggest winners in the last several months, but the current risk/reward ratio is not good for long-term investors.

Fundamental analysis: Nike has declared a $0.275/share quarterly dividend

Nike shares continue to trade in a bull market, and for now, there is no signal of the trend reversal. Even with the COVID-19 pandemic, the sale of Nike products is going well, and it is essential to mention that Morgan Stanley hiked its price target on Nike to $152.

“We believe NKE is in the early innings of transition from a traditional wholesale business to a digitally-driven, direct-to-consumer brand. Covid-19 has allowed NKE to further accelerate its DTC strategy, making it one of the key apparel & footwear companies,” said analyst Kimberly Greenberger.

Nike has declared a $0.275/share quarterly dividend, which represents a 12.2% increase from the prior dividend of $0.245. It is important to mention that the company will pay a dividend on December 29, while the ex-dividend day will be on December 04.

Technically looking, Nike shares could reach the $152 price target this December, but with a $211B market capitalization, this stock is overvalued in my opinion.

There are also some obvious risks when it comes to trading Nike (NYSE: NKE) shares, and the company announced that it would reduce its workforce by ~700  in response to the pandemic’s ongoing effect. The risk/reward ratio is not good for long-term investors, and the correction of the US stock market could be around the corner.

Technical analysis: The price of the stock is trading near record levels

Nike’s valuation is currently near an all-time high, and as long the price is above $120, this stock remains in the “buy” zone.

The current support levels are $130 and $120, $ 135 and $140 represent the resistance levels. If the price jumps above $140 resistance, the next target could be located at $150, but if the price falls below $120, it would be a firm “sell” signal and maybe a sign of the trend reversal.

Summary

Nike shares have advanced from $60 above $138 in less than several months, and for now, there is no indication of the bullish trend reversal. Nike has declared a $0.275/share quarterly dividend, representing a 12.2% increase from the prior dividend of $0.245. Some analysts say that Nike is still undervalued relative to the market, but with a $211B market capitalization, this stock is expensive in my opinion. Nike’s valuation is currently near an all-time high, but if the price falls below $120, it would be a strong “sell” signal and maybe a sign of the trend reversal.