Nike’s Pullback Is an Opportunity You Shouldn’t MissNKE) is one of the world’s most well-renowned brands. For long-term investors, Nike has proven to be a dream stock over the years. However, buying winning stocks early is not the only mantra for successful investing. Investors should also accumulate great stocks on pullback to generate wealth in the long-term.
Nike is down about 20% from its 52-week highs, and if past is any indicator, this dip is a strong buying opportunity.
Inevitable rising growth
Nike has grasped a robust position in the sports apparel market.
These contracts were extremely expensive contracts, but have been a superior source of brand differentiation for Nike, which means greater pricing power as well as above-average profitability for stockholders. Despite Nike’s huge size, the company is projected to produce around $32.5 billion in revenue this year, with over 50 percent of its entre sales coming from international markets. The sales from international markets have supported the company to take lead over its competitors like Under Armour.
Nike has outperformed in the sneakerheads segment, but now the company is aggressively focused on the women’s market. All giant apparel companies have recognized the potential of women’s market mainly due to the reputation of athleisure wear and the arrival of companies such as Lululemon Athletica.
Nike’s women’s gear sales escalated 15 percent in 2015 as the company continued investing in the women’s market. Nike has also introduced some stores particularly for women, and believes that women’s market is a significant part of its target to grow top-line to $50 billion by 2020.
Furthermore, Nike is taking various steps to attract customers like the launch of Nike+ apps, which comprise a suite of exercise tracking tools intended to compete against rivals. Though the company has many of its own retail stores and rising e-commerce operations, it mainly relies on retail partners to reach consumers. And Foot Locker is by far the most significant part of Nike’s strategy, as two out of three pairs of sneakers that Foot Locker retails are from Nike.
All in all, Nike’s pullback looks attractive as the stock will likely outperform in the long-run. Nike is still a great stock for investors who have a five year investing horizon. Hence, investors should accumulate the stock on the pullback.
Published on Jun 6, 2016By Prudent Investor