Nike stock analysis.
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Nike reported earnings last week and the stock dropped about 2%. Shares are now down 40% since hitting a peak in 2021.
That means Nike is now valued at 168 billion dollars. It’s got 10.6 billion of cash and investments and 8.9 billion of long-term debt so the enterprise value is roughly 166 billion.
In its latest report, Nike reported 51.2 billion in revenue for the latest fiscal year which was an increase of 10%.
That’s decent growth but bottom-line earnings are suffering from inflation. Nike’s cost of sales increased by 14.6%, driven by an increase in raw materials and labor costs, so bottom line net income shrunk by 16% to 5.1 billion.
That means Nike stock is currently valued at 3.2 times revenue and 33 times earnings. Looking at a historical chart, both ratios are near the bottom of their historical range though they’re not necessarily low enough to signal a buying opportunity.
Looking ahead, Nike retains a dominant position in what is a highly competitive market. 65% of its revenue comes from footwear, of which there are no shortage of rivals, from established brands like Adidas to new upstarts like On Cloud.
So the key to Nike’s future will be it’s ability to expand globally and on this front, there was good news. The latest report revealed that sales in China grew 16% in Q4 with a 22% increase in apparel sales. That compares to only a 5% increase in the North American market.
This is a good sign that Nike will benefit from China’s post-pandemic recovery. In fact, earnings from the Chinese segment was up a whopping 70% on the quarter while all other areas were down.
#stocks #investing #nikestock #stockstobuy
Join 8000 other investors: https://www.overlookedalpha.com
Nike reported earnings last week and the stock dropped about 2%. Shares are now down 40% since hitting a peak in 2021.
That means Nike is now valued at 168 billion dollars. It’s got 10.6 billion of cash and investments and 8.9 billion of long-term debt so the enterprise value is roughly 166 billion.
In its latest report, Nike reported 51.2 billion in revenue for the latest fiscal year which was an increase of 10%.
That’s decent growth but bottom-line earnings are suffering from inflation. Nike’s cost of sales increased by 14.6%, driven by an increase in raw materials and labor costs, so bottom line net income shrunk by 16% to 5.1 billion.
That means Nike stock is currently valued at 3.2 times revenue and 33 times earnings. Looking at a historical chart, both ratios are near the bottom of their historical range though they’re not necessarily low enough to signal a buying opportunity.
Looking ahead, Nike retains a dominant position in what is a highly competitive market. 65% of its revenue comes from footwear, of which there are no shortage of rivals, from established brands like Adidas to new upstarts like On Cloud.
So the key to Nike’s future will be it’s ability to expand globally and on this front, there was good news. The latest report revealed that sales in China grew 16% in Q4 with a 22% increase in apparel sales. That compares to only a 5% increase in the North American market.
This is a good sign that Nike will benefit from China’s post-pandemic recovery. In fact, earnings from the Chinese segment was up a whopping 70% on the quarter while all other areas were down.
#stocks #investing #nikestock #stockstobuy
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NewsTranscript
00:00 Nike reported earnings last week and the stock dropped almost 2%.
00:03 Shares are now down 40% since hitting a peak in 2021. That means Nike is now valued at $168
00:11 billion. It's got $10.6 billion of cash and investments and $8.9 billion of long-term debt,
00:17 so the enterprise value is roughly $166 billion. In its latest report, Nike reported $51.2 billion
00:24 in revenue for the latest fiscal year, which was an increase of 10%. That's decent growth,
00:29 but bottom line earnings are suffering from inflation. Cost of sales increased by 14.6%,
00:34 driven by an increase in raw materials and labour. So bottom line net income shrunk by 16%
00:40 to $5.1 billion. That means Nike's stock is currently valued at 3.2 times revenue and 33
00:47 times earnings. Looking at a historical chart, both ratios are near the bottom of their historical
00:53 range, though they're not necessarily low enough to signal a buying opportunity. Looking ahead,
00:58 Nike retains a dominant position in what is a highly competitive market. 65% of its revenue
01:05 comes from footwear, of which there are no shortage of rivals from established brands like Adidas
01:10 to new upstarts like OnCloud. So the key to Nike's future will be its ability to expand
01:16 globally and on this front there was good news. The latest report revealed that sales in China
01:22 grew 16% in Q4, with a 22% increase in apparel sales. That compares to only a 5% increase in
01:30 the North American market. This is a good sign that Nike will benefit from China's post-pandemic
01:35 recovery. In fact, earnings from the Chinese segment was up a whopping 70% on the quarter,
01:40 while all other areas were down. Longer term, let's assume that Nike can maintain a revenue
01:45 growth rate of 9% for the next 10 years and get its net income margin back up to 12%.
01:51 That would see the company producing roughly $14.5 billion of net income in 10 years time
01:57 and a 25 times multiple would put the company at a valuation of $363 billion. Add in a slowly
02:04 increasing dividend and the annualised return is around 9.2% per year. That may not seem like much
02:11 but Nike has one of the strongest brands in the world and its stock should remain a reliable and
02:16 consistent performer with a small dividend. It won't make you rich but I do give the stock
02:21 a slight bullish rating. But these are my personal opinions, not financial advice and I do hold some
02:26 shares in Nike. For more detailed investing ideas make sure to visit our website overlookedalpha.com