More Upside for NKE Stock?
Nike Inc’s (NYSE:NKE) stock is down almost 13% year-to-date. Nike stock has been on an especially long slope down since the middle of April. Meanwhile, there has been a shortage of good news to bolster the company and prompt a bullish rebound.
However, Nike stock should be entering an especially strong bullish phase soon thanks to the start of the busy summer sports season. This includes two global appeal blockbusters: the Euro 2016 soccer championship and the Rio Olympics.
Though the popularity of soccer is rising among Americans—and, for some reason, Hillary-voting Liberals are a large reason—Euro championships are second only to the World Cup in viewership. Nike is a main sponsor for Euro 2016 and the company has just released an Oscar-worthy ad. (Source: “Watch Cristiano Ronaldo’s incredible new film ahead of Euro 2016 as he switches bodies with an English schoolkid,” Daily Mail, June 9, 2016.)
The real bullish case for Nike stock is that the Euro soccer championship is no longer just a European interest event, as it had been until a few years ago. Today, it’s a massive global event with fans growing in the very regions where Nike is targeting growth, most notably China and Asia. That’s the not-so-veiled “secret” that most investors may not have considered in their appreciation of Nike stock.
Nike stock reached an all-time high of $67.16 last November. While it is still trading at historically high levels in the $55.00 range, Nike shares are headed back to record levels.
The potential sales that this summer soccer championship and Olympics double-whammy can generate are a solid catalyst for the stock. There is a real possibility, if not probability, that Nike stock will outperform the market. As of last week, 32 polled analysts have target prices ranging from a median of $77.00 per share to a high of $100.00 per share. (Source: “Nike Inc,” Financial Times, June 10, 2016.)
Such is the buzz around this summer’s double-whammy sports extravaganza that analysts are predicting Nike stock to surge, as its brands could end up dominating both fashion and sports headlines.
Nike is already the global leader in sports apparel and sells its clothes and famous footwear with the swoosh logo in stores, online, and at its own retail locations. However, Donald Trump may not be a Nike fan, because the company maximizes profits by manufacturing its clothes and shoes outside the United States. (It does have some U.S. manufacturing, though.)
Surprisingly, despite its huge market share, Nike has much more potential to grow, especially when it comes to China. It so happens that soccer is growing at an incredible speed in China. While Euro 2016 is limited, as the name suggests, to European teams, Chinese investors have been buying up some of the world’s most famous soccer teams. Recently, Suning Commerce Group, an electronics retailer, bought a majority stake in Inter-Milan, one of the most historic and iconic teams of the sport. By comparison, Inter-Milan is to soccer as the Dallas Cowboys are to American football.
Asia is the market that Nike can tap to offset slowing sales in mature markets like the United States. Events like Euro 2016 are one of the keys to building overall revenue for Nike, where it is especially known for basketball. Many Chinese boys have made their first dunks in a pair of Nike “Jordan” shoes.
The emphasis above was on “boy” because while Nike and other sports brands enjoy strong sales with men, they still have room to grow with women. Sales in this category approached $5.7 billion, which is 22% of total sales. This suggests women’s apparel is a major opportunity for growth for Nike. (Source: “Nike Has A Lot To Offer, And The Game Is Just Beginning,” Seeking Alpha, June 6, 2016.)
Euro 2016, meanwhile, is more important than any other sports events. The biggest soccer stars now, with the exception of Lionel Messi and Neymar (who play on European teams), like Cristiano Ronaldo, play in Europe and fans in the emerging markets are watching. (Source: “Brands bank on stars to sell to fans,” TodayOnline.com, June 10, 2016.)
For Nike, Euro 2016, which started on Friday, June 10, is a chance to establish its domination in the market, beating out rivals like Puma. For a whole month, fans around the world will be watching and talking soccer. There should be an inevitable halo effect, prompting those same fans to buy related gear.
Nike and Adidas are the undisputed leaders in the soccer sports equipment market, with Puma being their eternal challenger. However, Nike’s leadership is in the soccer shoe department. Nike supplies six competing teams, including England, Portugal, and Italy.
The real ace in the hole, however—and what fans, especially in Asia, will be looking out for—is which brands of shoes and shirts their favorite soccer stars are wearing. Having secured the likes of the world’s most famous player, Cristiano Ronaldo, the score is currently Nike: 1, Adidas: 0.