Two of the most widely watched stocks continued to diverge. Consumer goods producer Nike (NKE) is on a prolonged downtrend, while streaming firm Netflix (NFLX) is up.
Nike is cutting costs. It detailed its plans to take a $300 million pre-tax charge. Employee severance cost cuts account for most of Nike’s business realignment. Management is seeking to increase its efficiency so that its profits grow again.
In January, Nike cut 775 jobs at its U.S. distribution facilities in Tennessee and Mississippi.
Unfortunately, Nike’s management lacks a strong vision. The leaders are evaluating the Converse brand. Despite its appeal to consumers from a design and price perspective, Nike might consider selling the unit.
Netflix is a star stock. After letting Paramount Skydance (PSKY) win the bid to purchase Warner Bros. Discovery (WBD), NFLX stock gained nearly 25%. The company no longer has to strain its balance sheet with the WBD buyout. Additionally, Paramount paid $2.8 billion in a generous break-up fee that Netflix may use to increase shareholder value. It could, for example, buy content licenses from Paramount. That would increase the attractiveness of signing up for a Netflix subscription.
PSKY stock peaked at $14 last week but closed below $12. Its stock risks re-testing the $10 level, especially after Fitch downgraded Paramount’s debt rating to junk. PSKY stock has a short interest whose float is 5.9%.
