Loading...

NIKE

April 17, 2024
18
1490
0

Don't Just Do It, consider the risks vs rewards

 

 

Current share price: $124.84

Market Capitalisation: $193.6 billion

Dividend Yield: 1.1%

 

Nike is a leading global brand in the sports apparel and footwear industry, with a strong history of innovation, brand recognition, and financial success. Here are a few key reasons why Nike is an attractive investment opportunity:

 

THE POSITIVES

 

  1. Nike has a strong track record of financial performance, with consistent revenue and earnings growth over the past decade. In the most recent fiscal year, Nike reported $44.5 billion in revenue, up 19% from the previous year, and net income of $5.7 billion, up 40% from the previous year.
  2. Nike is the largest player in the global sports apparel and footwear market, with a market share of around 27%. The company's brand recognition and market position provide a competitive advantage, enabling Nike to charge premium prices for its products.
  3. Nike has a diverse portfolio of products and brands, including the Nike, Jordan, and Converse brands. This diversification helps the company mitigate risks associated with changing consumer preferences and economic conditions.
  4. Nike has a strong culture of innovation and has consistently introduced new products and technologies that have disrupted the sports apparel and footwear industry. Examples include the Flyknit technology for shoes, which reduces waste and improves durability, and the Nike FuelBand, a wearable fitness tracker.
  5. Nike has made a commitment to social responsibility and sustainability, which has helped to build a positive brand image and appeal to socially conscious consumers. The company has set ambitious sustainability targets, including a goal to use 100% renewable energy by 2025.

 

THE RISKS

 

  1. Nike faces strong competition from other sports apparel and footwear brands, such as Adidas and Under Armour. Changes in consumer preferences or the introduction of new products by competitors could negatively impact Nike's sales and market share.
  2. A significant portion of Nike's revenue comes from sales in the United States and China, and changes in economic conditions, trade policies, or consumer preferences in these markets could negatively impact the company's financial performance.
  3. Nike sources its products from a global supply chain that is subject to risks such as transportation disruptions, labour disputes, and natural disasters. Any significant disruptions to the supply chain could impact Nike's ability to meet customer demand and negatively impact its financial performance.
  4. The COVID-19 pandemic has had a significant impact on the global economy and consumer spending patterns, and there is a risk that this could negatively impact Nike's financial performance in the short-term.
  5. Nike's brand image and reputation are important assets, and any negative publicity or perception could negatively impact the company's financial performance. For example, issues related to labour practices or product quality could impact consumer trust in the brand.

 

FINANCIAL STATEMENT SUMMARY

 

From the financial summary attached, it is evident that Adidas is in a stronger financial position than Nike, however Adidas has been making news waves after they exited all contracts with Kanye West recently and the financial impact of this is being wildly speculated. It is important to consider all the factors. Adidas also has a dividend yield of 2.3%.

 

https://www.cnbc.com/2023/02/10/adidas-could-take-a-1point3-billion-revenue-hit-if-it-cant-shift-its-yeezy-stock.html

 

CONCLUSION

 

Nike is a strong investment opportunity due to its strong financial performance, dominant market position, diversification, innovation, and commitment to social responsibility. While there may be some short-term risks associated with changes in consumer preferences and economic conditions, the long-term outlook for Nike remains positive.

 

Disclosure: I own shares in NIKE at time of writing as part of my long-term dividend portfolio. Full position built.

 

Disclaimer: Nothing in this article should be seen as financial advice. Everything stated is for educational purposes only. Always do your own due diligence.


 


Related Tags:
3 min read
Share this article:

Related Articles

All articles
Top