This Is Why Nike’s Stock Is a Buy

Jun 30, 2012
J. Webster
Comments Off on This Is Why Nike’s Stock Is a Buy

I just got this email from Nike, it says, “Game on, World”. And then says, “Measures Your Game. Raises the Game”.

But why is Nike’s stock a buy when they just said earnings will be hurt by the slow down in Europe and China? Three words: sensors, social and smart.

Well, to expand on this, Nike’s almost becoming a computer or tech company. Their almost becoming like Apple – well that’s a bit of a stretch but you get the idea. Their almost creating products that could be as coveted as the iPod. What they’re doing is becoming social and smart. They now have sensors in their shoes to show you just how hard your running, jumping or training. The products that enable this tracking include: Nike Fuleband, Nike Running, Nike Training, Nike Basketball.

Who’s behind all this innovation at Nike? His name is Stefan Olander.

The NikeFuel band is a way for people to set simple, daily goals, Olander says. “You don’t make it this massive change,” Olander says. “You have to think about it as the least amount of uncomfortable change. We don’t say, go out and run a marathon tomorrow, it’s this incremental change. There is this nudge to keep you going.”

Just wait until they expand into all sports. Every elite athlete is going to want these products. And once the elite athletes have these products then everyone else will want them too.

Nike’s stock is presenting us with a buying opportunity. It was down over 12% at one point on Friday but closed at about $88 a share. The drop took nearly $4 billion off Nike’s market capitalization.

Watch this stock and look to buy on the dips. Long term, over the next few years, as Nike continues to tie in all their products with social and measuring tools, the stock is going to reflect that. The Nike brand is going to slow down.

And there was this little tidbit after all the bad news from Hedgeye:

Despite yesterday’s horrid earnings report, we do remain bullish on the stock over the long-term. Capital expenditures are leveling off, the new NFL contract will grow into a half-a-billion dollar business in about two years, and the sale of Cole Haan and Umbro (both of which Nike had no business owning) will generate cash to play with.

Lastly, you’d have to say the Miami Heat winning the NBA title behind Lebron James is good for Nike. And then there’s Tiger, can he make a resounding turnaround in his career? This too would bold well for Nike.

Learn more over at Nike about their new training measuring tools.

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