Nike Stock Forecast: BCG Matrix & SWOT Indicate Long Term Value

This article was written by David Shabotinsky, a Financial Analyst at I Know First, and enrolled at the undergraduate Finance program at the Interdisciplinary Center, Herzliya.

Nike Stock Forecast 


  • Background on Nike Inc. and its business strategy
  • BCG Matrix Analysis using product segments
  • SWOT Analysis on Nike Inc.
  • I Know First’s self-learning algorithm maintains a bullish forecast on NKE shares


NIKE, Inc. (NKE), together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. It offers products in nine categories, including running, NIKE basketball, the Jordan brand, football, men’s training, women’s training, action sports, sportswear, and golf. (Yahoo Finance).

Nike was founded in 1964, with the initial intention of selling running shoes. As time went on, their product range widened to apparel for common sports, such as basketball and leisure wear. In 1976 Nike had reached revenues of $14 million and went public in 1980, initially offering 2 million shares of stock. By 1997, the stock hit an all-time high at a price of $76 a share. Then, in 2003, Nike purchased Converse. Earlier in 2016, at a shareholder meeting, CEO Mark Parker set a goal to reach $50 billion in sales by 2020. NKE expects to do so through continual product development, further market penetration in emerging markets, and increasing focus on its women’s division.

Nike, a brand that many athletes and non-athletes have come to use to define premium quality athletic products and services. The firm has seen much growth in its business strategy development and brand recognition over the past couple decades. They had begun to shift their efforts and targeting the higher end market in the athletic apparel industry to become the dominant premium brand (above Adidas).  The brand of Nike is no longer representative of even athletic apparel, rather they have managed to create an idea that they are able to help individuals overcome obstacles. This can be seen in almost any Nike commercial, whereas the main idea is not advertising the specific shoe or other product, rather the idea of overcoming obstacles. Nike’s income has risen tremendously over the past decade. For example, in 2015, they had reported a net income of $3.27 billion, up from the previous year’s income of $2.69 billion. In addition to the operational activity it is important examine how much the company actually earned in cash to ‘take to the bank’. Their cash has as well increased tremendously to 3.85 billion in 2015, from 2.22 billion in 2014.

Nike’s Value Creation 

In general, there are two main avenues to achieve a competitive advantage, either through cost leadership or differentiation. Today, Nike mainly practices product differentiation on the user-end to its consumers, as it offers premium products at a higher-end price. For a firm to achieve a real competitive value, it does so through the follow: Value= Utility – Cost.


By offering the highest utility to consumers, Nike has been able to control the market share in the foot apparel industry, and thus one of its main competitive advantages is its brand equity. In the 1990s, Nike had implemented a cost leadership strategy to regain market share it had greatly lost. Today, it has been able to successfully implement both aspects, which is rare. A huge competitive advantage of Nike is that it does not own any factories for production, rather outsources operations to hundreds of factories in countries like China, and maintains very tight supply chain control. Through its supply chain management, it is able to lower costs of production, while maintaining its high standards. Additionally, it also lowers its inventory risk, because if a trend in the market changes it is able to change inventory faster. Another main advantage that it has is its ambitious R&D and product development. Nike operates in approximately 180 countries and is able constantly introduce new product lines with successful expansion. The use of prominent athletes, adds to its brand image. One of Nike’s most valuable resource/capabilities are its financial ones. Nike has a consistent overall revenue growth and dividend payout to shareholders. It as well has a large amount of retained earnings leftover as it’s able to develop top line athletic products.

BCG Analysis for Nike Inc. 

In order to better understand the market position of Nike and whether they can capitalize on their products, one can use a BCG matrix analysis to divide the various product segments and benchmark their performance to their largest competitor(s). The data gathered is directly from Nike’s most recent 10k form, and the product segment division is Footwear, Apparel, and Equipment.

Nike Stock Forecast

More on what a BCG Matrix is can be found here.

The data was taken from Nike Inc. and Adidas’ 10k forms, and the market share was determined by revenue of each firm as they represent the top firms in the industry. Additionally, market growth was determined by taking revenue growth for various firms and comparing them to Nike’s growth in each of the segments chosen.

SWOT Analysis for NKE


  • Brand Equity (intangible assets), since it controls the largest market share in its industry and sells high-end premium products to consumers. It is able to retain top athletes such as Lebron James, which adds to consumers taste. It understands as well which athletes to cover and how to exploit value from athletics. Its partnership with Michael Jordan has continued to heavily payoff, mainly through shoe sales.
  • Supply chain management, since it does it own any physical locations it can move and outsource to improve operations with more ease. Additionally, it practices a ‘make to stock’ strategy in its supply so it is able to provide customers with the most readily and fashionable available goods.
  • R&D, the firm invests heavily in product development so it’s able to offer premium products. It owns top doctors, specialists and other scientists from around the world to develop enhanced performance athletic wear.


  • Poor consumer perception from labor practices, in that Nike’s image can be damaged as a result of its efforts to outsource to cheaper alternative manufacturers who are more known for poor labor practice. A poor public image can hurt Nike’s sales.
  • Nike charges high prices for its products, which hurts the purchasing power of its consumer. As Nike enters more emerging market countries consumers will be much more price sensitive, especially those poorer population sets. Additionally, it sells heavily to retails who themselves are price sensitive also. The price sensitivity especially becomes risky when entering recessionary downturns in the economy.



  • Emerging markets, while markets in OECD nations like America have become more saturated Nike still has much room to grow in bigger population countries like China and India. Its product portfolio would need to be adjusted to fit the needs of those in China’s economy for example, and it can use its strong R&D to do so.
  • Horizontal integration into other high-end products such as sunglasses and jewelry.
  • Product development, since the company is known for innovation. Furthermore, it can use its financial resources to acquire innovative smaller brands.


  • International trade, since it trades in 180 countries it is heavily exposed to exchange rate risks and other underlying risks from global trade.
  • Competition is very high in Nike’s industry which can squeeze its margins. For example, Under Armour and Lululemon are newer brands gaining high popularity.
  • General market trends can change over time, and thus Nike must constantly innovate to stay on top.

I Know First’s Algorithmic Prediction for NKE

I Know First’s self-learning algorithm maintains a bullish forecast on NKE over a 1 month, 3 months, and 1-year horizon. For the 1 year horizon, the algorithm has a signal strength and predictability indicator of 56.23 and 0.65, respectively. The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position). The Predictability indicator is the actual fitness function being optimized every day and can be simplified explained as the correlation based quality measure of the signal.


The strong brand equity and financial health of Nike Inc. create a great value play in the long run. Using a SWOT analysis and BCG Matrix, one can determine the best product segments and the key advantages that Nike is offering to investors. The three main segments that Nike competes in are either a ‘star’ or ‘cash cow’, showing how strong of a market position and revenue it generates from them. I Know First’s self-learning algorithm maintains a bullish outlook on NKE shares in the long-term as well.