If a stock is trading near its 52-week low, you know that it's probably facing some challenges. But when you're talking about a stock that is trading at around its five-year lows, you know it's probably in deep trouble, and may already be in the midst of a turnaround.
Nike (NYSE: NKE), Intel (NASDAQ: INTC), and Kraft Heinz (NASDAQ: KHC) all seem like they could be good, cheap buys to load up on right now, given their beaten-down prices. But investors have been struggling to find reasons to take a chance on their respective businesses.
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Let's take a closer look at whether you should consider buying any of them, or if these stocks, which are trading around levels they haven't been in at for years, still look destined to fall even lower in value.
1. Nike
Nike's stock hasn't been this cheap since 2017. The reason the stock has been struggling is that sales are down, and it has made a change at the CEO level in order to focus more on retail (as opposed to online, which it was prioritizing in the past).
But what has compounded the risk is the threat of tariffs, as Nike imports a lot of its products from Asia. President Trump has paused "reciprocal tariffs" on countries (except China) for a period of 90 days, but this is becoming an evolving development, which has led to investors not wanting any part of Nike's stock.
However, what concerns me more about Nike isn't the tariff risk, which may prove to be a temporary one, but instead the problems related to affordability. Investors shouldn't forget that Nike was already in trouble before the tariffs. And I'm not convinced that simply focusing on retail is going to fix that -- not when consumers have more options for cheaper apparel through online marketplaces. The company's sales have risen by just 15% over its past three fiscal years (Nike's year ends in May).
A better move for Nike may be to simply position itself more as a luxury brand and trim its offerings and store count. By doing so, it would be less vulnerable to current market conditions and not have to worry about cheap products taking market share, as it would target a different type of customer.
I don't think that's the direction it's heading in right now, which is why I wouldn't take a chance on the business, as this could still be a disastrous road ahead for Nike; investors shouldn't assume the shoe stock can't go lower.
2. Intel
Intel is in trouble as well, but I think there may be more hope for the business than there is for Nike. That's because as a top computer maker, Intel can stand to benefit from the growing needs in the tech industry, specifically as they pertain to artificial intelligence (AI). The ongoing trade war between China and the U.S. reinforces the importance of having domestic chipmaking abilities in the U.S.
The company has struggled with building out a foundry business, as it has incurred significant losses thus far. Last year, its foundry segment reported an operating loss totaling $13.4 billion.
There are reports that chipmaking giant Taiwan Semiconductor Manufacturing will take a 20% stake in Intel's foundry business, to help operate the factories. Doing so could help improve efficiency and lead to more positive results. It hasn't been confirmed, but it could be a huge development if it's true, as Intel looks to be struggling to do all on its own.
Intel's stock is down around the levels it was at back in 2012. This is a risky buy, but given the need for domestic chipmaking abilities in the U.S. and with Intel potentially playing a huge role in that, it could make for one of the most intriguing contrarian investments to hold on to right now.
3. Kraft Heinz
Shares of Kraft Heinz bounced off new 52-week lows they hit recently, but prior to that, the last time the stock was trading at cheaper levels was back in March 2020, during the pandemic-fueled crash. Kraft would end up rallying afterward, but the situation is a bit different now.
Today, millions of people have been turning to GLP-1 weight loss drugs to help shed pounds, and that has curbed appetites. And as consumers have been focusing on healthier eating options, that is also weighing on the business' growth prospects.
The exclamation point on all this was when Kraft pulled its Lunchables products from school cafeterias due to low demand; schools weren't thrilled with the meal kits, which contained more sodium than the versions sold in stores.
Kraft is a business in need of a turnaround, to pivot toward healthier eating options. Its sales have been stagnant over the past few years, and without a drastic change in its offerings, I don't think things will get better anytime soon for the business. While it may seem like a cheap buy, trading at just 11 times its estimated future earnings (based on analyst estimates), this isn't a stock I'd rush to buy, as it lacks a compelling growth catalyst or reason to remain bullish on the company's long-term future.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel, Nike, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Kraft Heinz and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
