2024-03-15 04:29:09 ET
Summary
- Nike aims to maintain double-digit growth through its Nike Digital platform and expansion into the Chinese market.
- The company has experienced a slight downturn due to macroeconomic headwinds and inefficiencies in its direct-to-customer investments.
- NKE's valuation is still at a premium, leaving downside risk if the market loses confidence in its growth potential.
It's clear that Nike ( NKE ), the famous footwear and apparel brand, is a great business. Its innovative marketing and willingness to outspend its competitors in order to gain competitive advantage have rewarded them with ROCE consistently above 20%. With Nike trading around its pre-pandemic high, there seems to be pessimism surrounding the company. Nike is aiming to keep up double-digit growth through Nike Digital and by tapping into the Chinese market, which is rapidly expanding thanks to its growing middle class. Despite being down 43% from its high, Nike is still trading at a premium P/E multiple of 30, which leaves a lot of downside risk if the market loses confidence in Nike as a growth company, making me rate it a Hold....
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Nike: Risk Of Growth Stagnation Outweighs Reward