Nike Inc (NKE): The Great Brand Protector

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Nike Inc (NKE) has been in the news again recently. Not because of its stock, or its sales but because of its swift and sure drive to cut its connection to athletes that tarnish the image of sports in general and its brand in particular.

Nike Inc (NKE): The Great Brand ProtectorJust this week, NKE dumped Russian tennis star Maria Sharapova from its celeb athlete list when it was discovered that Sharapova tested positive for a banned performance-enhancing substance.

The drug, meldonium, was just made illegal as of Jan. 1, but there’s no tolerance for ignorance with NKE at this point.

Nike also recently dropped boxer Manny Pacquiao for his disparaging comments about homosexuals.

The company has a history of being pulled into these controversies because the major athletes that represent NKE have massive exposure thanks to its marketing and branding efforts. And when they fall from grace, they’re more icons than people with the Nike swoosh on their shoes.

Sharapova and Pacquiao join the likes of Lance Armstrong, who was also dumped quickly after his unraveling.

Meanwhile, some might talk about NKE hypocrisy, because it hung on to Tiger Woods after his scandal, and Kobe Bryant as well.

NKE’s Standards Aren’t Focused on Morals

But the NKE litmus is more about sports than morals. It will not stand for unsportsmanlike behavior, but it doesn’t expect athletes to be society’s moral guardians. What people do in their private lives has little to do with the NKE brand on the field of play.

Tiger Woods is an interesting case because NKE’s golf division is relatively small. According to theStreet.com, it comprises about 3.5% of the company’s total revenues. When Tiger was hot, it was growing 10% a year some years.

Of course, after the scandal, Tiger walked away from the sport for a couple of years. And even after his return, he never got back to the level he had. The division has suffered since then, actually losing market share in the past year or two.

But NKE also hedged its bets in 2013 by signing golfing up and comer Rory McIlroy to a major deal.

Beyond the celebrity athletes, NKE remains the industry pacesetter. It continues to outpace its competitors and shows no sign of slowing down. And that’s saying something for a company that sports a $103 billion market cap.

German competitor Adidas AG (ADR) (ADDYY) holds a $22 billion market cap and newcomer and growth sensation Under Armour Inc (UA) comes in at $17 billion. That means NKE is already more than four times the size of its most tenacious competitors.

But it’s not just its size, but it’s the company’s agility for its size. It’s like a 300-lb linebacker that can run a 4.2 40-yard dash. Definitely a force to be reckoned with.

NKE stock is off nearly 4% year-to-date — this is a great time to buy in at bargain prices.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/nke-the-great-brand-protector/.

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