Nike Inc (NKE)

Their direct-to-consumer business is increasingly important so that it recaptures margins. The consumer will be cautious heading into the holiday season. Inventories will be important when Nike reports Thursday.

Downgraded today. He bought it earlier this year based on positive momentum starting with last October's low through last spring. Now, they have challenges with China and we will learn more when they report Thursday. Technical are not good now. The entire apparel-footwear sector is challenged by consumers; back-to-school sales were disappointing, so this will lead to lots of discounts in the holiday season. Troubles lie ahead. Troubles began last spring with Foot Locker's weakness.

Nike benefited during Covid when people were at home buying shoes and collectors were buying their prestige shoes, but both trends have ended or cooled down. At what point will investors say that Nike stock is cheap enough and then buy? He thinks it will make a new low. Buy at $80, though it's already cheap at a 28x PE and a 21x forward PE. Nike is cheap but will break down further. Nike has never had two down years in a row, except once.

Share price under pressure due to recession fears.
Revenue & EPS growth expectations have been lowered.
Strong brand and franchise value.
Earnings number projections may not be met.
Current share price high for shoe maker. 

Nike has earnings power as freight costs decline and better inventory control. Nike is never cheap though. She likes their 15% exposure to China. Huge gross margins.

He's considering this, though consumer sentiment will likely falter in September, so he's not rushing into retail. He's light in retail. Prefers this to Lulu, because Nike is the best in business. Will buy 10% lower at a lower PE.

Slumping sales in China impacting results, whereas she expected a faster recovery in China. Plus continued write-down of excess inventory. Long-term returns have been good. Volatility presents opportunity.

It's on his shopping list as a rental, to hold a short (not long) term. A secular grower and dominant brand. Now and then, this goes on sale, and that's when you buy. He's researched this a lot. Has owned this in the past and is strongly considering it again.

Now at a forward PE of 27x, but would buy at 24x. A quality company.

Great company. Issue is China, as demand hasn't come back and economy's slowing. Is Air Jordan getting old and tired? Competitors are showing up. He believes in the story.

China is on fire for Nike, loves it, but China makes up 14% of their business vs. 42% North America and 26% Europe/Middle East/Africa. China is still buying Nike despite higher prices. But don't buy Nike solely on warmer US-China relations.

Just reported an earnings miss. He's owned this on and off for over 30 years. He's done well owning this with a forward PE of 23-24x. He predicts estimates and the PE to come down after this miss. He will buy if shares fall 10% lower.

They report tomorrow night. No idea what the results will be, but there's been a lot of bad news in this space from Foot Locker. Nike is a long-term core holding and the PE is cheap historically. Direct selling will improve margins.

A terrible purchase for him because inventory issues persist. They really have to prove their story with earnings tomorrow and he doubts it.

Shares have been brutal since he bought it. Foot Locker dragged down Nike with its last earnings report. Next Thursday, Nike has to tell a positive story about reducing inventory through discounting. Also need to tell a positive story about China contributing to their profits.