NKE vs ADS
Two of the world’s largest sportswear brands go head-to-head this week, so if you are a Swoosh gal or a Three Stripe Company kind of guy, this one is for you!
This week’s snapshot is focused on 2 sports brand picks across our EasyWallets:
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Nike Inc (NKE)
Nike is an iconic brand and offering with brand slogans like “Just do it” and the iconic “Swoosh” logo which has been edged into our minds for decades now. The American multinational corporation has been making headlines again after its recent fourth-quarter earnings report.
The report card showed that its revenue moved lower by 1% year over year but grew 3% in currency-neutral terms which beat analyst expectations while earnings fell 3% but still cleared expectations. Headline numbers looked stable but what rattled investors was the possible headwinds facing the company in the future. Nike projected another profit margin decline for Q1 and that it had a 24% increase in its inventory which puts it in a risky position if consumer demand weakens.
- Share Price: $ 101.18
- Market Cap: AU$ 159.23 billion.
- P/E Ratio (TTM): 27x
- P/B Ratio: 10.4x
- Dividend (Annual Yield %): 1.21%
- 52 Week range low of $ 99.53 and $ 179.10 share high.
Outlook – Looking longer-term, Nike Inc does hold value and is reasonably priced by our estimates as a reopening of China should see sales growth increase. Nike CEO John Donahoe stated that their fiscal 2023 forecasts remain positive and should see sales back in the double digits. Nike is the largest sportswear company in the world for a reason and it should continue to expand its margins over the long term, but it first needs to clear its China hurdles.
Technical Outlook - The Nike Inc share price is lower by close to 40% YTD, and we have seen the price action trend lower since reaching all-time highs back in November. The share has a Beta of 0.96 and a very low short interest of 0.82% of shares outstanding. We could see the downtrend continue until the price action breaks out of its channel supported by a positive fundamental picture. Until then the major support levels at $102.65 and 93.80 will be watched closely for further downside.
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Adidas AG (ADS)
Over the decades, Adidas has become a force to be reckoned with, the largest sportswear manufacturer in Europe and the second-largest globally after Nike. As reported in our previous commentary, Adidas has seen its fair shares of ups and downs over the years.
Soaring inflation and lockdowns in China have been central to the “Three Stripe Company’s" nearly 35% share downturn, and more could be in store. But Adidas is looking longer-term and is still positive on its 2025 goals, despite a dismal first quarter. Adidas CEO Kasper Rorsted stated that a double-digit sales drop in that market is possible in 2022, as a sudden recovery in China is unlikely. Still, he predicted strong growth in that market again in the future.
- Share Price: € 167.64
- Market Cap: € 30.67 billion.
- P/E Ratio (TTM): 25.9x
- P/B Ratio: 4.6x
- Dividend (Annual Yield %): 2%
- 52 Week range low of € 160.26 and € 336.25 share high.
Outlook – Looking toward the rest of the year, Adidas still expects currency-neutral revenues to increase by 11% and 13%, while growth is now anticipated at the lower end of this range. This is due to the severe impact of covid-19-related lockdowns in China, which has seen large numbers of store closures across greater China. Adidas also holds value over the long run and a dividend yield of around 2% with a low Beta (5 Year) of 0.91 compared to the broader market. It faces the same near-term headwinds as its larger counterpart, and the situation in China will be watched closely.
Technical Outlook – the share price has also been trending lower in a channel since reaching a new high almost a year ago. The price action has reached pandemic lows again, around € 162.10, which is a significant support level that EasyVSTRs should take note of. We could see more downside on the horizon until the fundamental picture improves. Long-term average analyst target expectations are around the € 251.52 price level (green line).
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How do they stack up?
Geopolitical tensions and global recession fears could see more downside for both companies. The pandemic lockdown situation in China should be a focal point for EasyVSTRs, as this could be a key driver moving forward into the rest of the fiscal year. Both companies have innovative product offerings and are heavyweights when it comes down to footwear and sports accessories. So ultimately, it comes down to choice, are you a Jordan or a YEEZY EasyVSTR?
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Read: U.K. Top of the POPS
Sources –EasyResearch, Nike Inc, Demitri Kalogeropoulos, Koyfin, StartupTalky, SeekingAlpha, Adidas Group, Reuters
Take note: all share data was taken on 04/07/2022
Follow Barry Dumas
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Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.
