Stock (Symbol) |
Nike (NKE) |
Stock Price |
$53 |
Sector |
| Retail & Travel |
Data is as of |
| January 14, 2017 |
Expected to Report |
| Mar 20 – 24 |
Company Description |
 NIKE, Inc. is engaged in the design, development, marketing and selling of athletic footwear, apparel, equipment, accessories and services. The Company sells its products to retail accounts, through NIKE-owned retail stores and Internet Websites (which the Company refers to as its Direct to Consumer or DTC operations), and through a mix of independent distributors and licensees throughout the world. The Company focuses its NIKE Brand product offerings in eight key categories: Running, Basketball, Football (Soccer), Men’s Training, Women’s Training, Action Sports, Sportswear and Golf. The Company also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking and outdoor activities. The Company’s portfolio brands include the NIKE Brand, Hurley and Converse. Source: Thomson Financial |
Sharek’s Take |
 Nike (NKE) continues to have its earnings estimates lowered, and that’s why the stock is stuck in a downtrend. Estimates are falling because Nike is losing market share to Under Armour & Adidas. Adidas is doing extremely well with a fresh line of sneakers. The Nike styles look to be lightweight, but looked a little cheap because the logo swoosh wasn’t stitched on. During the past 30 years NKE’s stock has gone from fifty cents to more than 50 dollars. Last year when the stock was $65 NKE had a P/E of 30 as profits had just grown 24% in the latest fiscal year (ending May 2015). That 30 P/E was hard to sustain, as history shows NKE used to have a P/E of around 20. Right now NKE has a P/E of 23, which I still feel is a tad high considering the company is growing profits around 6% a qtr. My goal is to purchase the shares in the Conservative Growth Portfolio below $50. 2017 profit estimates have been eroding the past 4 qtrs from $2.46 to $2.40, $2.38 and now $2.34 so I don’t think the stock will take off here and leave us behind. Overall this stock has an Estimated Long-Term Growth Rate of 12% per year in addition to a 1% dividend yield. |
One Year Chart |
 This is a tough looking one-year chart, but in Nike’s defense the stock had a stellar run in the year’s leading up to this. Last qtr profits rose 11% as sales increased 6%. Profits were expected to fall 4% last qtr, and the company beat the street handily for the 2nd straight qtr. Unfortunately, analysts took Estimates down across the board and now qtrly profits are expected to clock in at -4%, 18%, -1% and 20% the next 4 qtrs. The Est. LTG of 12% is down from 13% last qtr and 14% back in April 2016. Still, 12% is solid for such a safe stock, and the company pays a 1% dividend as well. |
Fair Value |
 NKE sells for 23x earnings and my Fair Value for 2017 is $51 a share. Which means I need to get it below $51 to get any kind of value. Also, the company has its fiscal year end on May 31st, so next qtr I will be looking ahead to next year’s numbers when calculating a P/E ratio. But, estimates have been eroding. There’s a lot to factor in here, but notice in 2011 the stock sold for 19x earnings, so that’s where I would like to buy. |
Bottom Line |
 Nike is a high-quality company that’s also a good investment for conservative investors. The company has grown profits in nine of the last ten years and has increased its dividend every year during the past decade. Sure Under Armour and Adidas are doing well now but this juggernaut will be able to adjust and compete in the future. I feel this would be a fine addition to the Conservative Growth Portfolio but would like to get the stock below $50 a share. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
