It’s time to breakdown one of the most iconic brands around. Here is the breakdown of $NKE, otherwise known as Nike.
Current Price: $140.66
52/Wk High: $147.95
52/Wk Low: $60.00
Market Cap: $220.8 Billion
Dividend: $1.10 / 0.78% Yield
Read below for the breakdown!
Nike is one of the largest footwear, apparel, accessories, and equipment brands in the world with a major portfolio consisting of not only the Nike brand, but Jordan, Converse, and Hurley brands as well.
Breaking down Nike’s stock price according to TREFIS (@trefis) data, 64.6% of the stock price is based on the Nike Brand Footwear segment.
Furthermore, 28.8% is based on the Nike Brand Apparel segment, 3.7% based on the Other Businesses segment, 2.8% on the Nike Brand Equipment segment, and 0.1% based on the Licensing Business segment.
Throughout 2020 Nike has had its ups and downs but has continued to push higher throughout year-end and delivering solid earnings numbers after a tough end to FY 2020.
Digging into the numbers Nike delivered a Q2 2021 beat with an EPS of $0.78, much better than the expected EPS consensus estimate of $0.62. On a year over year basis, the Q2 2021 EPS result represents 11.43% growth over Q2 2020.
As for Nike’s total revenues, the numbers continued to improve with revenues increasing by 9% to $11.2 billion. Breaking down revenues by segment, the Nike Brand segment revenues totaled $10.7 billion (Up 8%), while the Converse segment turned out $476 million in revenues (Down 4%).
Shifting into margins, gross margin declined by 90 basis points to 43.1%. Management noted that the decline in margins was due to COVID-19 promotions with the goal of reducing inventory.
Gross profit, on the other hand, continued to improve, with gross profit totaling $4.847 billion in Q2 of FY2021.
When it comes to expenses, selling and administrative expenses declined by 2% to a whopping $3.3 billion. Breaking the company’s expenses down, demand creation expenses totaled $729 million, representing a 17% decline.
On the flip side, operating overhead expenses increased by 4% to a total of $2.5 billion. Management noted that this increase was mainly due to $135 million in restructuring costs.
Rounding out the quarter, net income totaled $1.3 billion, representing a 12% increase. It is also important to note that Nike ended the quarter with $6.1 billion in inventory, representing a 2% decline year over year.
Management was upbeat about the quarter.
“Nike’s strong results during a dynamic environment show the power of staying on the offense, Fueled by compelling innovative product and global brand momentum, we continue to extend our leadership,” CEO John Donahoe said.
Not only are Nike’s earnings solid, but the balance sheet is as well.
Total Debt: $9.451 Billion
Total Liabilities: $24.196 Billion
Total Assets: $34.836 Billion
Cash & Short Term Inv: $11.812 Billion
While the numbers are great, and valuation is expensive.
Price to Earnings: 80.70x
Price to Sales: 5.81x
Price to Book: 20.82x
Management has continued to outperform and lead the company.
Return on Equity: 28.27%
Return on Assets: 9.20%
Return on Invested Capital: 12.76%
Given the numbers, the analysts are bullish with the mean price target sitting at $162.96/share, representing a 15.57% upside.
It is also important to note that the high price target is $183.00/share, representing a 29.78% gain, while the low price target is $140.00/share, representing a -0.72% loss.
The big money is also quite involved with 81.38% of Nike being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
On a technical basis, Nike is bullish but could be flashing opportunity. According to the six-month charts the MACD has been mostly flat, with minimal momentum around 2.55.
The six-month charts are also indicating an RSI of 58.71 and CCI of 45.68, both of which are more neutral than anything. It is also important to note that Nike trades near all-time highs.
In short, Nike is a solid long-term pick with an iconic brand, growing sales, more room for pandemic recovery, and a 2021 where most sports should return.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.