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Nike Is About to Extend Its Dominance in Basketball, so Buy NKE Stock

As the NBA Playoffs get underway NKE stock is a great bet

It’s no secret that, for the past twenty-plus years, Nike (NYSE:NKE) has been the unchallenged leader in the global athletic apparel industry. During that stretch, Nike has gone from up-and-coming athletic apparel brand, to the face of the global athletic apparel industry, while Nike stock has gone from $5 to $85.

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It’s also no secret that the basketball market has been the key driver of that success. The Nike growth narrative started its hockey stick growth trajectory after NBA legend Michael Jordan and the brand teamed up in the 1980’s to forever change the basketball footwear market. Nike hasn’t looked back since. Now, the global basketball apparel market is a several billion dollar market, and Nike sits firmly atop it.

With that in mind, here’s a reason to buy NKE stock: Nike is about to even further extend its dominance in the all-important basketball apparel market through new athlete signings and new signature shoe launches.

The theory is simple. Such market share gains have been the main fuel for huge gains in NKE stock over the past twenty years. Continued market share gains over the next several years should consequently keep NKE stock on an uptrend.

As such, I remain bullish on NKE stock here. The basketball market has been key to this company’s success over the past twenty years, and the outlook in that all-important market is better today than it has been in recent memory. Consequently, the outlook for Nike stock to keep rallying remains favorable.

Nike Is About to Sign Some Huge Athletes

Nike has the best NBA athlete portfolio of any athletic apparel brand, and it’s not even close. Under Armour (NYSE:UAA) has Stephen Curry. Adidas (OTCMKTS:ADDYY) has James Harden. Nike has everyone else, including Michael Jordan, LeBron James, Kevin Durant, Kyrie Irving, Kobe Bryant, Giannis Antetokounmpo, Paul George, and Russell Westbrook, among many others.

That’s big. In the basketball market, stars set the trends. Consumers want to “be like Mike.” What they buy is determined by what their favorite stars are wearing. Nike controls the lion’s share of the NBA’s top stars. As such, they control the lion’s share of the basketball apparel market.

There are reasons to believe that Nike’s star athlete portfolio is about to get some major additions. Specifically:

  • Highly followed Los Angeles Lakers guard Lonzo Ball appears to be making a switch from family-owned Big Baller Brand to Nike, and despite not being an all star quality player, Lonzo Ball gets MVP-like coverage and is a marketable guard, so his capacity to sell shoes is actually quite large.
  • Highly touted Duke basketball player Zion Williamson is set to enter the NBA draft, after going to a Nike-sponsored college. That doesn’t guarantee that he will sign with Nike for his NBA contract. But, it does give the brand a leg up in signing him, especially since Nike fitted him with custom shoes following the shoe blowout, and those shoes worked fine. Zion, given his unparalleled athleticism and propensity for highlight reel dunks, is exceptionally marketable, and will likely sell a bunch of shoes, wherever he lands.
  • Other projected top picks in this year’s NBA draft (RJ Barrett, Cam Reddish, Ja Morant, Rui Hachimura, and Coby White) all have Nike ties. They all went to Nike colleges, and most went to Nike-sponsored high schools and played for Nike-sponsored club basketball teams. Of particular relevance are Morant and White, since they are both electric guards that fit the profile of someone who could sell a lot of shoes in the NBA.

All in all, it looks like Nike’s NBA athlete portfolio is about to get even bigger and better. That has positive financial implications for Nike, which should consequently sell more basketball shoes than ever before.

New Signature Shoes Will Create Tailwinds

Another key basketball market tailwind investors should be paying attention to is Nike’s forthcoming launch of signature Giannis shoes.

For those who are unaware, Giannis is arguably the hottest, most popular, and best player in the NBA right now. He’s a 6 foot, 10 inch athletic specimen, aptly nicknamed the “Greek Freak”, who is the front-runner for MVP this year, and has led his team to a league-best record.

Importantly, of the league’s presumed top five players (Giannis, LeBron James, Kevin Durant, Stephen Curry, and James Harden), Giannis is the only one without a signature shoe. That’s about to change. Nike is set to launch a Giannis signature shoe, the Nike Freak 1, during the 2019 NBA playoffs, which are just a few weeks away.

Given the social stature, popularity, talent, uniqueness, and likability of Giannis, these shoes will likely debut to huge demand. If so, that will only extend Nike’s dominance in the basketball market, and further provide a long-running tailwind for NKE stock, since the Nike Freak 1 will likely be followed up by the Nike Freak 2, 3, 4, so on and so forth.

Bottom Line on NKE Stock

When it comes to the athletic apparel space, Nike is king. This dominance is largely a result of Nike’s leadership in the basketball market, since that market comprises a big chunk of the global athletic apparel pie.

Nike’s leadership in that market is only growing. Over the next few months, Nike will sign some big-name athletes with big-time shoe selling potential. The company will also debut a new signature basketball shoe, which should have huge demand.

All in all, Nike stock looks good here. The stock is richly valued. But, the company is firing on all cylinders. So long as that remains true, a premium valuation won’t stop the stock from going higher.

As of this writing, Luke Lango was long NKE.

Article printed from InvestorPlace Media, https://investorplace.com/2019/04/nike-is-about-to-extend-its-dominance-in-basketball-so-buy-nke-stock/.

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