Nike Share Price Outlook: Ronaldo Had A Great Season As Will Its No. 1 Sponsor Nike Inc.

This article was written by Anna Latini a Financial Analyst at I Know First

Nike Share Price Outlook


  • The Company Is In Very Good Shape
  • NIKE’s Response to Retail Crisis
  • Inside NiKE’s Triple Double Strategy
  • I Know First is Currently Bullish On Nike In The Long Term

Nike swoosh symbol is what comes to nearly everyone’s mind when thinking about running, sports clothing and obviously athletic footwear. In the years, the brand has been able to attract a very variegated consumer base across the world, it has become a market leader and as of today its rise does not seem to have reached an end.

The company is headquartered near BeavertonOregon, in the Portland metropolitan area. Founded on January 25, 1964, as Blue Ribbon Sports, by Bill Bowerman and Phil Knight, it officially became Nike, Inc. on May 30, 1971, taking its name from the Greek goddess of victory.

Nike reports its operating results under 2 segments, NIKE Brand segment and Converse. NIKE segment comprises many different brands, on a geographical basis: North America, Western Europe, Central & Eastern Europe, Greater China, Japan and Emerging Markets.

The corporation sells its products, manufactured by independent contractors, through its retail stores known as “Niketown”, its Internet Websites, and through a mix of independent distributors across the world.

The brand successfully markets itself by being the ambassador of numerous sports events and sponsoring high-profile athletes such as celebrity soccer player Ronaldo who provided Nike with great exposure thanks to the tremendous season he had. The company also supplies sport teams around the world, with its famous trademark of “Just Do It” and its logo.

NIKE Share Price Outlook

Source: Nike Commercial

The Company Is In Very Good Shape

On June 29th, Nike Inc. disclosed its Q4 and full year financial results causing its shares to rise by more than 9%, buoying the Dow and marking Nike’s best performance in the past two years. The report highlighted better than expected quarterly profits and sales and confirmed the awaited deal with Amazon through which platform the company will start selling a limited assortment of products.

Investors got excited as revenues rose by 5% to $8.7 billion, beating Ronaldo Had A Great Season As Will Its No. 1 Sponsor Nike Inc.

analysts’ forecasted figure of $8.6 billion, a 7% increase on a currency neutral basis. Driving growth were Western European regions, China and Emerging Markets with a strong increase in sales in the sportswear and running sections. Company’s subsidiary Converse did particularly well, generating revenues of $554 million, a 10% increase on a currency neutral basis. Net Income increased by 19% and reached $1 billion, not only due to the aforementioned sales’ growth but also due to lower selling and administrative expenses and a lower effective tax rate. Diluted EPS grew by 22% reaching $0.6 against expectations of $0.5, reflecting an almost 3% decrease in the weighted average of shares outstanding.

Looking deeper into it, less encouraging seems to be the performance of Nike’s apparel business, with clothing sales declining in the fourth quarter. However, this is far from being Nike’s problem only, as many retailers are struggling to find a so-called “sweet spot” in the apparel industry. Fortunately for the company, that is not its core revenue generator, accounting for about 30% of total revenues in the accounting year just ended.  

Overall, Nike displays a strong balance sheet, which offers the company the financial elasticity to drive future growth. Liquidity ratios are above the industry average while leverage ratios are markedly below those of competitors. Further, the company has repeatedly affirmed its commitment to improving shareholders’ value, supported by its strong financial position. Over the last 14 years, it has distributed regular dividends and made share repurchases to improve shareholder returns. During the fourth quarter it repurchased a total of 14.9 million shares for approximately $820 million as part of the four-year, $12 billion program approved in 2015. As of May 31, 2017, a total of 79.8 million shares had been repurchased, for approximately $4.4 billion.

Nike Share Price Outlook

Source: Yahoo Finance  

Nike Share Price Outlook

NIKE’s Response to Retail Crisis

Since crisis in the retail sector does not seem to have reached the end as recent bankruptcies suggest, Nike has been looking for new ways to engage with consumers online. The partnership with online giant Amazon is only at the beginning but after this pilot period the company might even decide to expand the range of products available on the platform. According to analysts’ estimates the deal has the potential to bring increase in revenues between $300 and $500 million and this might be only the start. Indeed, the company has announced its intention to begin selling products also through Facebook.  Furthermore, to counter consumer transitions toward online shopping, Nike revealed a new company plan – the Consumer Direct Offense. As part of NIKE’s “Triple Double strategy”, this reorganization initiative wants to improve consumers’ experience, by using digital tools and catering to them on a personal scale.
However, the brand envisages these changes to result in a 2% cut in its international workforce. This will lead to the elimination of nearly 1,400 workers. Management did not provide precise details of the layoffs but some analysts expect these to include redundant back-office roles.

Nike Share Price Outlook

Source: Nike Website


Inside NiKE’s Triple Double Strategy

While NIKE is in a good spot to gain from the rise in the digital era, it is still dedicated to consolidate its leadership and drive growth through the next phase. In order to do so, the company focuses on three core areas – continuous innovation that attracts consumers, supply chain efficiency for speedy delivery and the marketplace to connect with customers. Keeping these objectives in mind the company is focused on doubling the impact on each of the three above mentioned areas, as suggested by the strategy name. As for innovation, it targets at both doubling the cadence and the scale of innovation through performance and sports style. Regarding the supply chain, the company plans to double speed, starting from product conceptualization to delivery to consumer. Lastly, in the marketplace, the company is looking to double direct connections through digital membership and personalization. This will mean progressing at two times faster pace to drive growth.

Part of the plan comprises fueling growth by catering to consumers across 12 major cities including New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan These regions, spread across 10 countries, are anticipated to account for more than 80% of the growth forecasted by NIKE, till 2020.    
Also, the company is simplifying its geographic structure from six to four in order to aid this change and enhance efficiency. The four new regions, under which NIKE will report from 2018, will be– North America, Europe, Middle East and Africa (EMEA), Greater China, and Asia Pacific and Latin America (APLA). These geographic segments will be led by their respective VP/GM’s whom will ultimately report to Elliott Hill – President of Geographies and Integrated Marketplace.

I Know First is Currently Bullish On Nike In The Long Term

In an industry where customers’ tastes and preferences change rapidly, the brand has proven able to adapt to the evolving circumstances and I believe it has the means to continue doing so also in the future. Its plans to improve performance and to face the crisis of the retail sector hold all the assumptions to yield good outcomes, besides, the company very strong financials provide flexibility in case new investment opportunities arise. 12-month expectations on stock price have been revised upwards after last quarter earnings release, going from $62 to $64 suggesting that the company is still probably undervalued, despite the price’s surge of last week,with a P/E ratio significantly below that of its main competitors.The company’s history is a long series of successes as it has been outperforming the footwear & accessories industry for more than a decade now, yielding year to date total returns 5.19 points higher than the industry and 7.44 points above the S&P 500 index. This remarkable consistency in terms of results just reinforce our position that continues to be a buy for Nike’s stock, in line with the bullish algorithm forecasts both for the short and the longer period.

Nike Share Price Outlook


We recall that I Know First has been bullish on the stock for a few months now. In January NKE was already a strong buy according to our predictions, since then shares went up by more than 8%.


I Know First Algorithm Heatmap Explanation

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 signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above in order to feel confident about/trust the signal.

Nike Share Price Outlook