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Hype Asset of the Day | October 4th, 2022



NIKE, Inc. (NYSE: NKE)


Nike has become the premier activewear brand and is so successful at attracting loyalty that its footwear and apparel are practically uniform for millennials seeking stylish sportswear. Nike grew to be the largest sporting wear company in the world, with more trailing-12-month revenue than Adidas, Under Armour, Lululemon Athletica, and Sketchers combined. That gives it tremendous leverage as it tries to grow amid world economic pressure. With its recent successes, Nike has seen an increase in mentions by 67% over the last day, encouraging investors to wonder what makes the company gain so much hype. Currently, shares of Nike trade at $87.15.



Positive Hype

Nike has the brand strength, strategy, and general financial health to keep it moving forward until the economic situation improves. So let’s take a look at some of the factors that give it the positive hype to continue.


  • First, brand strength. Nike continues to be a favorite brand in both North America and China. Nike's Jordan brand reported its strongest year ever in the last fiscal year.


  • The company’s strategy to sell directly to consumers and focus on digital is working. The digital business has almost tripled since the 2019 fiscal year to top $10 billion in revenue, which was the highest ever.


  • Nike's revenue in the quarter rose 4%, or 10% in currency-neutral terms, to $12.69 billion, which beat estimates at $12.27 billion.


  • The company's non-GAAP (adjusted) earnings were $0.93 per share, which beat analysts' consensus estimate of $0.92, although was down 20% from the year-ago quarter.


  • In the recent quarter, Nike reported $11.9 billion in cash, equivalents, and short-term investments. That's higher than Nike's long-term debt of $8.9 billion.


  • Nike has lifted its dividend payments over 20 consecutive years and seems like it will continue to do so despite external factors that might injure this possibility.


  • They're trading at 27 times forward earnings estimates. That's down from more than 45 earlier this year, which makes now a great time to take a position in the company.


Negative Hype

Before pulling the trigger on an investment, it’s imperative you consider the negatives. Here are a couple of reasons to avoid picking up any shares of Nike.

  • The maker of athletic apparel and shoes disappointed investors last week when it reported high inventory levels and a decrease in gross margin. Like many retailers, Nike faces higher costs and supply chain troubles.


  • It also slashed its profit guidance for the year, calling for adjusted earnings per share of $0.47-$0.53, down from a prior range of $0.63-$0.68.


Conclusion

First, it's important to note that Nike's troubles are due to external and temporary issues. There are still elements such as rising inflation and a stronger dollar that may stick around for a while, however, this doesn’t seem long. Nike is a long-term player that’s fundamentally strong and will stay that way, too. Given its current price, Nike is a steal right now and will weather through the near future, if you’re considering taking a position in the company, do it now.



HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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