Nike is a global manufacturer and retailer that makes clothing and shoes for women, kids, and men. It has become the biggest athletic footwear brand in the world, helped by its partnerships with major sporting events. The company also owns the Jordan brand and Converse.
Nike sells its products in its retail locations, website, and in partnering retailers like Footlocker, Footassylum, and Walmart. The company operates over 377 stores in the United States and 668 in other countries, where it generates most of its sales.
Nike operates in a highly competitive industry, where its top competitors are companies like Adidas, Under Armour, and On Holding. It has also become a leading player in the athleisure industry, competing with firms like Lululemon Athletica and The Gap’s Athleta.
Nike, which Phil Knight established, has seen its annual revenue grow from over $37 billion in 2019 to $51.36 billion in the last financial year. However, its stock has dropped sharply as its growth slowed and competition rose.
Nike stock was trading at $76.95, while its HypeIndex metric stood at 66%.
Learn more about the NKE stock here.
Positive hype
Nike has seen its positive hype because of the recently announced Chief Executive Officer (CEO). Analysts anticipate that Elliot Hill, a top executive who has been at the organization for decades, will lead its turnaround.
Nike’s stock has become undervalued based on its historical metrics. Its forward non-GAAP PE ratio of 34 is lower than the five-year average of 35. Its GAAP metric of 35 is also lower than its five-year average.
Analysts have upgraded Nike’s stock. Needham has a buy rating, while Deutsche Bank, Guggenheim, Williams Trading, and BMO Capital also have buy ratings.
The company is a good turnaround story after going through a deep slowdown in the past few years. A good starting point is to restart its relationship with other retailers like Footlocker.
Nike is a good dividend company having boosted its payouts for 12 years straight and has grown it by 12% in the last five years.
Nike has also been lowering its outstanding shares through buybacks. It has reduced its shares from 1.27 billion in 2021 to 1.19 billion today. It repurchased stock worth $1.1 billion last quarter.
Negative hype
Nike’s growth is still slowing. The company's most recent quarterly results showed that its revenue fell by 8% to $12.4 billion.
Most of this slowdown was because of NIKE Direct, whose revenue fell bu 13% to $5 billion. It was offset by the wholesale business, whose revenue fell by just 3% during the quarter.
Nike’s margins are in trouble as the gross figure dropped by 100 basis points to 43.6%.
Nike is facing substantial competition from the likes of ON Holdings and Adidas.
Nike stock price analysis
The weekly chart shows that the Nike share price has been in a downtrend, making it one of the worst-performing Dow Jones stock. It has formed a descending triangle pattern, a popular bearish chart patterns.
Nike has moved below all moving averages and the key support at $79.67, its lowest point in September 2022. Therefore, the short-term outlook is bearish, with the initial target being at $70.30, its lowest point this year. More gains will be validated if the stock rises above the 50-week moving average and the upper side of the triangle pattern.
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