Nike Stock Trading News, Not The Last Dance-Earnings&Performance

Trading News - Nike, the multinational footwear and apparel titan, experienced a noticeable stumble recently as its Stock fell 2.4% following an earnings report that fell short of Wall Street's expectations. Despite posting revenues that surpassed Wall Street's predictions at $12.83 billion, outpacing the anticipated $12.59 billion, the company's profits were less than expected. The mixed fourth-quarter results caused a stir in the market as shares fell over 3.6% in pre-market trading.

The company's gross margins slid to 43.6% in the quarter ending May 31, down from the previous year's 45%. Nike attributed this decline to an assortment of factors including elevated product input costs, freight and logistics costs, higher markdowns, and adverse changes in net foreign currency exchange rates. These factors were only partially offset by strategic pricing actions undertaken by the company.

Moreover, Nike's earnings per diluted share clocked in at $0.66, missing the expected $0.67 per share, according to Bloomberg consensus estimates. Yet, the sports apparel juggernaut remained optimistic about its future prospects, noting the ongoing recovery in China from the pandemic-induced economic downturn and the company's continued efforts to trim down its inflated inventory.

Despite the setback, John Donahoe, President & CEO of Nike, Inc., emphasized the strength of Nike's performance. He noted that the fiscal year 2023 marked a milestone year for Nike, fueled by the company's investment in innovation and its digital leadership. This, he suggested, was driving broad-based growth across Nike's portfolio of brands and creating value by catering to the future of sport.

While North American sales only saw a modest 5% increase in Q4 year-on-year, the company's stronghold in the Chinese market continued to yield strong results with a 16% jump in sales. Yet, even these encouraging figures couldn't completely dispel the concerns about Nike's profitability, given the dip in gross margins and the company's strategy to sell through excess merchandise at discounted prices.

One of the most important metrics to watch is the company's guidance on future revenues. While Nike anticipates revenues to be flat or grow in the low single digits, this falls short of the consensus for growth of 4%.

Nevertheless, Wall Street analysts still voiced positivity about Nike's earnings report. According to Stifel analysts, the company enters FY24 "well positioned". Their sentiment was echoed by Barclays Consumer Discretionary Analyst, Adrienne Yih, who highlighted three factors that investors should consider when buying the stock: revenue, inventory, and China revenue.

Nike's influence extends well beyond the realm of sports. The brand has an astounding social media presence, with Instagram followers totalling 252 million, 36 million on Facebook, 9.58 million on Twitter, 5 million on LinkedIn, 3.1 million on TikTok, 1.71 million on YouTube, and 568k on Reddit. These figures are testament to the company's far-reaching appeal and cultural resonance.

As of June 30, 2023, Nike's stock price stands at $110.37, down from its all-time high of $174.26 on November 5, 2021. The 52-week high for Nike is $131.31, a figure that is 19% above the current share price, while the 52-week low is $82.22, 25.5% below the current share price. The average stock price for the last 52 weeks is $112.02. The company's market cap as of June 30, 2023, is $174.25 billion, with a net profit margin of 9.9% as of February 28, 2023, and a PE ratio of 35.10.

Nike's brand strategy is best characterized by the word "emotional". Their advertisement campaigns are famed for stirring up an array of human emotions that everyone can relate to - pain, strength, doubt, rededication, and joy. These campaigns tell compelling stories, focusing on the struggles and triumphs of athletes.

Nike is well known for its sponsorships and endorsements. It has collaborated with high-profile athletes including Tiger Woods, Maria Sharapova, Rafael Nadal, Neymar Jr., LeBron James, Derek Jeter, and the late Kobe Bryant. These partnerships have broadened Nike's appeal and have maximized the reach of their marketing efforts.

The brand's financial health is also robust. Nike's revenue for the quarter ending February 28, 2023, was $12.39 billion, a 13.97% increase year-over-year. For the twelve months ending February 28, 2023, the revenue was $50.626 billion, an 8.13% increase year-over-year. Its annual revenue for 2022 was $46.71 billion, a 4.88% increase from 2021, and its annual revenue for 2021 was $44.538 billion, a 19.08% increase from 2020.

One of Nike's perennial cash cows is the Air Force 1, which remains incredibly popular and has maintained sales in excess of $800 million per year. The white Air Force 1 Low is one of the best-selling shoes of all time. Analysts report that the shoe sold an estimated 12 million pairs in 2005 alone, more than two decades after its debut, and it still ranks as Nike’s second bestseller.

In conclusion, while the stock market's short-term fluctuations may cause temporary concern, it's worth remembering the strength and stability of Nike's brand. Their vast social media presence, emotional marketing strategy, high-profile endorsements, and popular product lines, such as the Air Force 1, contribute to a robust business model that continues to generate impressive revenues. This is why Nike is a good choice for long-term investment.
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