Nike – Just Do It! Or Just Leave It?

Nike, Inc. (NKE) is currently trading at $62.51 per share, in what has been a short-term bearish trading session. For the year-to-date, the stock has performed negatively with losses fluctuating between 0.06% – 0.32% at any given point. If we consider analysts opinion on Nike, it is still a strong buy with a mean recommendation of 1.8, where 1.0 represents a strong buy and 5.0 represents a sell. The stock has a mean target price of $71.91 per share and a high target range of $100 per share. The low target price is forecast at $32.75. While there have been few upgrades and downgrades to speak of in 2016, all of those from the latter half of 2015 pegged the stock as a positive performing stock or a buy, with the following upgrades/downgrades reported:

For the current month, trader sentiment remains firmly bullish on Nike stock, with the majority of traders either recommending a strong buy, a buy or a hold position, with no under-perform expectations and no sell ratings on the stock at all. In terms of its performance against the industry as a whole, it’s a no-brainer. Nike has shown strong growth overall compared to the industry and the sector, although it is not the best performing entity – it is definitely a solid performer. Consider that the year-on-year revenue growth for Q3 was 5.41% for Nike while that of the industry was 10.19%, the sector -0.94% and the S&P 500 index 2.87%. The below chart reflects the consistently positive performance of Nike, even when other categories are delivering negative returns.

Nike’s success is largely dependent on its marketability with the athletes that it endorses. It has dominated the clothing, footwear and textile scene for decades, and continues to be the dominant force. Various celebrities and high profile sports teams promote the Nike brand, but the company has come in for some tap of late when it announced certain financial obligations to various colleges, athletes, sports teams and leagues. For the fiscal year ending the 31 May 2015, Nike was obligated to pay $6.2 billion to these respective creditors. It’s not so much that Nike has obligations to sports stars and teams; it is the annual percentage increase of these obligations that concerns investors to a degree. For the year ending 31 May 2015, the $6.2 billion figure was 32% higher than the figure for 31 May 2014. If we rewind the clocks back to 2007, Nike spent significantly less at a maximum of $2 billion per annum on its commitments.