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Wedbush Rated Nike as ‘Neutral’

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Price movement

Nike (NKE) has a market cap of $81.3 billion. It rose 0.20% to close at $49.72 per share on November 2, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.3%, -4.6%, and -19.8%, respectively, on the same day. NKE is trading 3.6% below its 20-day moving average, 8.3% below its 50-day moving average, and 12.6% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 0.98% of its holdings in Nike. The ETF tracks an index of US large-cap growth stocks selected from 200 of the largest US companies by market cap. The YTD price movement of IWY was 1.2% on November 2.

The market caps of Nike’s competitors are as follows:

  • F. Corporation (VFC): $22.3 billion
  • Under Armour (UA): $12.9 billion
  • Skechers USA (SKX): $3.2 billion

Nike’s rating

On November 2, 2016, Wedbush initiated coverage of Nike with a “neutral” rating and also set the stock’s price target at $53.0 per share.

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Nike’s performance in fiscal 1Q17

Nike (NKE) reported fiscal 1Q17 revenue of $9.1 billion, which is a rise of 8.3% from the $8.4 billion reported in fiscal 1Q16. Revenue from its Footwear, Apparel, and Equipment segment rose 6.8%, 8.9%, and 3.7%, respectively, and revenue from its Global Brand segment fell 42.3% between fiscal 1Q16 and fiscal 1Q17.

Nike’s revenue from North America, Western Europe, Central and Eastern Europe, Greater China, and Japan rose 6.1%, 7.4%, 9.7%, 15.1%, and 36.9%, respectively, in fiscal 1Q17. Its revenue from emerging markets fell 2.2% YoY (year-over-year) in fiscal 1Q17. The company’s gross profit margin fell 4.2% YoY.

Nike’s net income and EPS (earnings per share) rose to $1.3 billion and $0.73, respectively, in fiscal 1Q17 as compared to $1.2 billion and $0.67, respectively, in fiscal 1Q16.

Cash and cash equivalents

Its cash and cash equivalents fell 18.1%, and its inventories rose 10.9% YoY in fiscal 1Q17. Its current ratio fell to 2.7x, and its debt-to-equity ratio rose to 0.74x in fiscal 1Q17, as compared with 2.8x and 0.61x, respectively, in fiscal 1Q16.

In fiscal 1Q17, Nike (NKE) repurchased 19 million shares for ~$1.1 billion. On August 31, 2016, it scheduled the delivery of $12.3 billion in orders between September 2016 and January 2017. This figure translates to a 5% YoY rise in orders and a 7% rise on a currency-neutral basis.

In the next part, we’ll look at Columbia Sportswear Company (COLM).

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