Nike’s Pullback Is a Massive Opportunity

Nike (NKE) has been a great long-term performer but the company’s recent success can be partially attributed to the strength in the active wear segment.

The active wear market has been one of the best performing segments in the clothing industry, and is projected to endure growing at approximately 4.5 percent CAGR by 2020, as people around the globe are extremely focusing towards fitness and middle growth in countries such as China promises well for this kind of product.

As a matter of fact, this particular segment is being crowded as many companies are entering in the segment with different kinds of products, but Nike and Under Armour (UA) are the only two massive companies that look well poised for the huge growth in the imminent few years.

In Q4FY16, sales and footwear giant, Nike, shared earnings per share of $0.49, $0.01 better than the estimates.
However, the company’s revenue came in at $8.24 billion, $40 million less than the estimates, but still that figure represents a surge of 5.9 percent year-over-year. Though that surge looks trivial, it is a great achievement for the company considering its massive size.

However, on a constant currency basis, Nike brand revenues surged 8 percent to $7.73 million, whereas Converse brand revenues escalated 18 percent to $513 million.
Nike’s Pullback Is a Massive Opportunity
Image by Neypomuk-Studios / Pixabay
Moreover, strong international sales offset feeble demand in the North America market.

Like Under Armour, decelerating sales growth as well as bankruptcy of Sports Authority had a bad influence on Nike. Still, Nike stock appears to be a superior value now for what will likely be endured long-term profit growth.

Moreover, the company’s profit margins have lingered to surge mainly due to growing focus on e-commerce and higher average selling prices. Through the power of sport, the transformation of industry and the alterations in customer’s preferences and prospects, the company carries on building a foundation for marvelous long term growth.

The company also detailed that the investments it made in mobile and online experiences have started paying off, and it continue to expand its worldwide reach with nike.com.

Conclusion

Looking ahead, Nike seems to be an attractive option for long-term investors especially given that the company is trading over 20% below its 52-week high levels. Nike is a great stock for long-term investors and given that the company still has a lot of room to grow, I expect it to continue repeating its past performance over the coming years.
Published on Sep 28, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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