The $S&P 500(.SPX)$ and the $NASDAQ(.IXIC)$ added to the record levels that they set the previous week while the $Dow Jones(.DJI)$ was within 0.4% of its record high. Overall, the three indexes were up around 2.0% in a holiday-shortened trading week.
The best-performing concepts is Footwear Concept. Considering the different perceptions of the stock, this time TigerPicks chose $Nike(NKE)$ to have a fundamental highlight to help users understand it better.
$Nike(NKE)$
Nike, Inc. is a leading global designer, marketer, and distributor of athletic footwear, apparel, equipment, and accessories. Nike operates in the sportswear and equipment sector, catering to a wide range of sports and fitness activities.
Most industry observers came down on the bearish side, citing fading China sales, year-over-year declines in US brand dominance, and slowdowns in shoes and apparel.
Then, of course, the impact of tariffs... as that story unfolds for investors and when the full force of tariffs falls upon the sector soon. Cost increases in production are being estimated by its management as $1 billion across the board to be expected this year.
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But regardless of a run of strongly negative metrics in the quarter, Nike generated $11.6 billion in revenue (down 10%). Adjusted profit per share of $0.70. Sales were $11.1 billion, down 28%. Yet the stock rose around $10. Despite the many bearish metrics facing Nike in the quarters ahead, Mr. Market apparently began to sense something in the air.
What cannot be denied beside bearish signs of decline is a)Nike's mountain of cash on hand of $8.5 billion, and b) it's continuing brand dominance despite market share declines, and the promotion of lifer Elliot Hill to the CEO post. He has already been online with investors, pointing out a series of steps he will take developing new products akin to markets today. Nike remains, for all its tough roads ahead, a solid, profitable, balance sheet power.
Why does buy on the dip make great sense before a possible run-up if and when policies instituted by the new senior management take hold? The downside built into Nike since mid-year seems to up to have come close to bottoming out. The thesis for selling or even going short fails when you forget what Nike was, what it is and what it can be at $71 to $82 when bear sentiment truly begins to fade.
Partnerships Should Drive Growth
As mentioned, Nike's issues will take time. But the company seems to be taking all the right steps to drive growth. The partnership with Kim Kardashian, in which the company announced a new brand, NIKESKIMS in the third quarter should drive sales.
They are also making leadership changes, product launches, and building athlete relationships to drive brand awareness and consumer connections. During the quarter they also announced partnerships with $Aritzia Inc.(ATZAF)$ $Urban Outfitters(URBN)$, a popular retailer in the U.S. and Canada that targets women.
And lastly, they announced a partnership with $Amazon.com(AMZN)$ to sell select apparel, footwear, and accessories this fall. Additionally, NKE will have its own featured brand store on the platform. And while this will likely take some time to see results, this was a very strategic move targeting women and Gen Z consumers.
And what better way to do this by partnerships with retailers like Urban Outfitters, Aritzia, and Amazon. Both URBN & ATZAF are up an impressive 67.2% and 83.6% in the past year as a result of their strong brand growth and expansion.
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Safe Dividend
Although seen as a growth stock, Nike's dividend track record is respectable and often overlooked with 23 years of consecutive dividend increases. And the company saw strong shareholder returns of $5.3 billion consisting of dividends and share repurchases.
NKE paid out $591 million in dividends during the quarter and $2.3 billion for the entire year. They also made $3 billion in share buybacks. Dividends for the full-year were $1.57, a solid 8.3% increase from the previous year.
Nike's balance sheet was also in good shape, giving them flexibility to navigate current headwinds and sustain their current dividend. Long term debt stood at $7.96 billion with no near-term maturities. Cash & equivalents and short-term investments were $9.2 billion.
Conclusion
Our analyst contingent today does recognize the built-in value of a Nike product as a standard brand leader that simply cannot be dismissed as a dying icon on one's feet or t-shirt. But in a sense, the recent performance has a bit of a recency bias that hangs until now. But its 2Q25 performance has many signs of life, indicating its strengths as well.
At $71 a share, there's still time to believe you're buying on the dip.
Stock Price Forecast:
Here are the target price forecasts for the next 12 months from analysts.
Based on 30 Wall Street analysts offering 12 month price targets for Nike in the last 3 months. The average price target is $76.70 with a high forecast of $120.00 and a low forecast of $56.00. The average price target represents a 0.41% change from the last price of $76.39.
Resource:
https://seekingalpha.com/article/4798530-nike-path-to-recovery-in-motion
https://seekingalpha.com/article/4798353-nikes-earnings-signal-end-of-long-decline-first-sign-of-buy-on-the-dip-potential
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