9. Nike Inc. (NYSE:NKE)
Analyst Upside Potential as of September 12, 2024: 17.21%
No. of Hedge Funds as of Q2 2024: 66
Nike (NYSE:NKE) is a luxury retailer that designs, markets, and distributes athletic clothing, footwear, accessories, equipment, and services for fitness activities. It sells its athletic and fitness collection under several brands, including NIKE, Jordan Brand, and Converse. In addition, it specializes in casual apparel, footwear, and accessories, distributing and licensing them under the All-Star, Chuck Taylor, Star Chevron, One Star, and Jack Purcell trademarks.
Nike’s (NYSE:NKE) revenue grew by around 1% in fiscal 2024, with EPS increasing 15%. The company has undertaken several strategic shifts in the past year, including organization and leadership changes, capacity building for investment in consumer-facing activities, and starting a multi-year innovation cycle. But most of all, Nike’s (NYSE:NKE) sharp focus is on sports. It is scaling innovation and newness, fielding brand distinction to build momentum in its product portfolio.
Nike (NYSE:NKE) has had an Express Lane for years, allowing it to avail of short lead time replenishment and hyper-local design. The company has plans to continue leveraging its Express Lane to build new ways of working across the entire product development process. It is now calling it the Speed Lane, and is integrating it as a company-wide effort to use its resources to accelerate design, use advanced digital tools to expedite development, and leverage key manufacturing partners to quicken product production and testing. Speed Lane is expected to bring out innovations in the second half of the fiscal year, highlighting Nike’s (NYSE:NKE) efforts to gain momentum and solidify its position in the market in the long run. The company is also expected to roll out several new fitness and lifestyle franchises by leveraging its Speed Lane, widening its consumer base.
Nike (NYSE:NKE) also has plans to reinvest around $1 billion in consumer-facing activities in fiscal 2025. The investment is anticipated to expedite the company’s strong growth by increasing resources in merchandising, design, and product creation for its key sports dimensions. It will also speed up the company’s running in key cities, elevate its brand distinction in physical retail, and drive bolder, larger brand campaigns, starting from the Paris Olympics and EC ’24.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its first quarter 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) recent earnings report was a mixed bag. While revenue met expectations and earnings exceeded them, the stock price dipped due to management’s cautious outlook for fiscal 2025. The company is currently undergoing a period of internal restructuring and product line adjustments, which is expected to lead to flat revenue growth in the first half of the coming fiscal year. However, this transition aims to position Nike for long-term success.
Our conviction in Nike remains high, and we expect it to emerge stronger and more competitive once the restructuring is complete despite the softer revenue forecast. Nike still anticipates earnings will grow around 10% in calendar 2024 and will accelerate to 15% in 2025 as execution normalizes.”
