We came across a long thesis on Nike, Inc. (NYSE:NKE) on ValueInvestorsClub by ThinkAnew. In this article we will summarize the bulls’ thesis on NKE. The company’s shares were trading at $83.56 when this thesis was published, vs. closing price of $73.31 on Jan 3rd.
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Nike, Inc. (NYSE:NKE) is the largest seller of athletic footwear and apparel in the world, with the primary activity of designing, developing and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. Footwear generates around two-thirds of total revenue, featuring renowned brands like Nike, Jordan and Converse.
Despite recent struggles and a 20-year history of flat operating margins, the author believes that Nike, Inc. (NYSE:NKE) represents an attractive investment opportunity. The bull thesis is primarily centered around the company’s scale, history and wide network of partner athletes – while it is undeniable that NKE operates in one of the most competitive industries in the world, the author believes that the company’s scale allows it to invest billions of dollars annually to be around the best athletes in the world and appear at the most popular sport events. This allows NKE to remain in the spotlight and create never-ending demand year after year (an amazing stat: three-quarters of NBA players wear either Nike/Jordan brand and half of the 2022 FIFA World Cup players wore Nike uniforms). Consequently, the company should be able to continue to sign up the majority of the best athletes within every generation, as long as management doesn’t mess up the execution.
The author also believes that NKE has made good progress in addressing past mistakes, such as benevolently giving up space at the largest retailers like Foot Locker to focus on direct-to-consumer distribution. This has led to more consumer attention towards competing brands, but management has already revised this policy, which should positively impact demand for NKE brands. Another potential catalyst for NKE is the upcoming 2026 World Cup and 2028 Olympics both happening in the US, which could bring unprecedented attention and advertising opportunities for NKE. All in all, the author estimates FY2030 EPS of $6.20-$6.30, which coupled with a target forward P/E of 20.0x, yields a target price of $125.00, or 70% upside to be realized over the next 5 years.
While we acknowledge the potential of NKE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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