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Nike, Inc.
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== '''NKE: Flexing Sales Power, Profits falling short.''' == Based on the baseline scenario of Comparable Trading Analysis, I am providing a HOLD recommendation for Nike Inc. (NKE) with a target price of $74.1, indicating a 32.4% downside from its closing price of $109.69 on August 8, 2023. This valuation has been derived from the Comparable Company Analysis. Despite trading at higher multiples than its peers, Nike maintains a significant advantage in terms of market share and has consistently demonstrated innovation. Leveraging its extensive experience in the industry and benefiting from improved economic conditions, Nike is expected to enhance its profits in the medium-term. === '''Nike's Evolution and Impact in the Athletic Apparel Industry''' === Nike, a transformative American multinational, has revolutionized athletic footwear and apparel. Founded in 1964 as Blue Ribbon Sports, it has evolved into a global powerhouse. Nike's business model focuses on designing, producing, and marketing athletic products worldwide. While its core is footwear, Nike also offers apparel, equipment, accessories, and services tailored to enhance athletes' performance. The company strategically aligns with athletes, crafting sought-after lines like the Air Jordan, Nike Air Max, and Nike Dunk. In more than 190 countries, Nike thrives, with key markets in the United States, China, and Europe. It remains agile, penetrating emerging markets like India and Brazil. This prowess translates into financial strength, evident in 2022's impressive $46.7 billion revenue and $7.2 billion net income. Nike's competition includes Adidas, Puma, and Under Armour, and its future hinges on expanding product ranges, entering new markets, and refining marketing and distribution strategies. The brand is renowned, ranked as Forbes' most valuable in 2022, and underpins major global events like the Olympics and FIFA World Cup. Despite criticisms regarding labour practices, Nike strides towards sustainability and progressive measures. Just as Airbnb altered travel accommodation, Nike's indelible footprint has disrupted athletic apparel, shaping a dynamic, evolving industry landscape. === '''Decreasing profitability and strong balance sheet''' === Nike's stock price demonstrated robust growth during the 2020-2022 period. However, the global disruptions in supply chains caused by the COVID-19 pandemic, coupled with issues like factory closures, transportation challenges, and material shortages, potentially impacted Nike's production and distribution capabilities. Moreover, due to an uncertain economic outlook, consumer spending has shown a declining trend. To address these challenges, Nike has turned to its wholesale partners to help reduce elevated inventory levels, which currently stand approximately 23% higher than those in 2021 (prior to the onset of supply chain constraints that affected the entire industry). While this approach has bolstered wholesale revenue in recent quarters, it has also led to a reduction in profit margins. To adapt, the company has strategically shifted its business model towards e-commerce, resulting in a decrease in the number of days required to collect receivables. As of August 07, 2023, Nike's current dividend yield stands at 1.25%, and its earnings per share (EPS) is reported at $3.23. === '''Future Concerns and Risks''' === Airbnb faces new challenges from competition from established players in the travel and hospitality industry, including hotels, online travel agencies, and home-sharing platforms. Airbnb's business is vulnerable to economic downturns, as reduced consumer spending on travel and tourism could lead to decreased demand for its services. It also faces legal and regulatory risks, such as lawsuits, fines, and increased regulations, which could increase its operating costs and harm its reputation of the company.
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