Nike Inc (NKE): Sustainable Bump, Or Just a Dirty Tease?

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Nike stock - Nike Inc (NKE): Sustainable Bump, Or Just a Dirty Tease?

Source: Alessio Jacona via Flickr

If you’re like me, you’ve probably been watching a lot of Olympics over the past two weeks. About 25 to 30 million of us have tuned in on a nightly basis, and that’s big business for the companies that pony up millions of dollars for every 30-second ad spot. The Olympics are especially big business for Nike Inc (NYSE:NKE) — and investors are snatching up Nike stock accordingly.

Nike stock logo NKE

Since Aug. 4 — the night before the Summer Games in Rio began — Nike stock is up 8% versus a flat S&P 500.

It makes some sense. A lot of Olympic viewers are investors. Seeing the Swoosh that many times over the course of 17 days seeps into your subconscious, perhaps making you a little more likely to buy Nike stock.

But what happens when the Games end?

Rough 2016 for Nike Stock

Prior to Rio, this wasn’t a great year for NKE stock. Shares were down nearly 12% for the year before the Olympics began, and off 16% from their March peak just shy of $65. A bad fourth quarter (which ended in May) was one culprit. Net income and earnings per share slipped for the first time in more than two years and North American sales were flat.

For the year, Nike’s sales improved just 5.8% from 2015, marking its slowest year-over-year growth since 2011. The company expects more “mid-single-digit” growth in the current quarter, well shy of the 9% growth analysts were expecting.

Increased competition from the likes of Under Armour Inc (NYSE:UA) — and the meteoric rise in popularity of its new poster boy, Stephen Curry — hurt Nike last year. Under Armour’s sales have grown by at least 25% in each of the last 10 quarters. Adidas AG (ADR) (OTCMKTS:ADDYY) has stepped up its game too, with sales up 13% last quarter and earnings per share nearly doubling.

A lukewarm climate for retailers in general has also hurt Nike, as has the strength of the U.S. dollar, which has weighed on profits in places like Western Europe and China, Nike’s second- and third-largest markets by sales.

Those are all somewhat concerning trends, but …

NKE Now a Bargain Buy

Nike stock still is a good holding for your long-term portfolio.

NKE still is the dominant player in the athletic apparel market. It still owns nearly half the U.S. athletic footwear market and more than 90% of the basketball sneaker market despite the rise of Steph Curry and Under Armour. And it has set an aggressive goal of reaching $50 billion in sales by 2020 (sales were $32 billion last year).

I think, more than anything, Nike stock was a victim of its own success.

From February 2009 to November of last year, NKE shares increased more than sixfold. It was due for a pullback, and the double whammy of the January and February market downturn followed by a weak earnings report were enough to knock it back a few pegs.

If anything, the recent struggles in NKE have created a more palatable entry point — the stock now trades at less than 21 times forward earnings estimates, down from 31 when it peaked last November. And having just pushed above its 50-day moving average, the stock is looking better from a technical standpoint too.

Whether Nike’s Olympic omnipresence convinces a few more consumers to buy Nike gear, NKE still is a growing company with a universally recognized brand. And right now, it’s a reasonably valued stock that appears to be on an upswing.

Moreover it’s getting a bump today amid news that Nike is partnering with Apollo Global Management to tighten up the company’s regional apparel supply chain. That’s not Olympic exposure. That’s a real business development that could help the company do more on the customization front, and get goods to and fro with less resistance.

Nike stock will be back. The recent Olympic bump could be the beginning of that resurgence.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/nike-stock-nke-bump-tease/.

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