They sponsor your favorites athletes. You already buy their shoes. Should you be buying Nike stock, too?
Even those who can't tell a basketball from a baseball know Nike has market power. Around the world when people hear the name it evokes images of athletic gear. That kind of global brand recognition has to translate into some sort of stock market success, right?
Before you go all-in on this giant of athletic apparel, spend time asking yourself a few questions. Keep reading for a basic overview of how to determine if Nike stock will fit into your overall strategy in planning for the future.
Is Nike in it for the Long Haul?
Before investing in any company, you need to make sure you aren't simply buying the hype. Sure, Nike has dominated sports apparel headlines recently, but will that momentum last for the next five years? Ten years? Twenty years? Unless you're hoping for a sudden (and far from certain) spike in share value, your investment depends on long-term growth.
With more than 50 years of company history, there's plenty of reason to believe Nike will be around for a long time to come. While there are relative ups and downs with any company over the long-term, Nike has managed to stay culturally relevant for decades. As it has grown, Nike has managed to make history several times. Among its achievements, it was the first company to secure a Beatles song for an ad – way back in the ‘80s. It has also maintained close relationships with the major sports stars, like Michael Jordan, who still has a partnership with Nike after several decades. This proven track record of being a sports powerhouse is certainly reassuring for investors who want long-term stability.
Nike is also poised to benefit from technological advancements that analysts expect to see in the retail sector. Nike doesn't need to depend on department stores to reach customers. It can sell directly online or through other e-commerce platforms. Data shows that e-commerce is growing fast, and barring any radical retail development, that trend will likely continue. That's bad news for brick-and-mortar retailers but good news for companies like Nike, who now have easier access to a global customer base.
What are the Upsides to Nike Stock?
Continued success has Nike boosting its economic goals. Nike has only become more confident in its growth targets in the past few years. That growth is concentrated in important areas, too. As mentioned above, one of the biggest trends that established companies are being forced to reckon with is the growth of e-commerce. Nike has sailed past its goal of 15 percent digital sales well ahead of schedule. That gave the company confidence to raise its long-term e-commerce goals, up from 30 percent of broader business to 50 percent or higher. Sales growth is also concentrated in innovative products, which not only secures business in the short-term but carves out a unique apparel and footwear niche with customers going forward. Last year the company said 80 percent of its growth came from innovative product releases, compared to the company's past goal of about 50 percent.
Partnerships with the biggest sports leagues
In addition to capitalizing on everyday purchases, like footwear, Nike also partners with major sports leagues. In January Nike secured a victory against one of its primary rivals, Under Armor. Under Armor secured an apparel deal with Major League Baseball, but the company ended up having to back out amid financial trouble. Nike has been Under Armor's rumored replacement since May, but an official deal was inked in January. With the MLB's support, Nike now outfits athletes in North America's three largest sports leagues (MLB, NFL, and NBA).
Navigating controversies with minimal damage
American society is fraught with political tension these days. Navigating through current events is like carefully treading through a minefield. But Nike has shown that it's resilient, even when it takes heat. Some on the political right were furious when Nike made an ad campaign featuring Colin Kaepernick as he continued his controversial protest against police brutality by kneeling during the national anthem at professional football games. Some of the political left were equally outraged when Nike co-founder Phil Knight made the largest political contribution in Oregon state history in support of Republican gubernatorial candidate Knute Buehler (though the $1.5 million didn't ultimately translate into a win for Buehler). Through it all, Nike's sales continued to grow at a steady clip.
What are the Downsides to Nike Stock?
Nike isn't immune to volatility. At the end of 2018, Nike beat earnings and sales estimates, but it wasn't all good news for the sports apparel giant. The company saw a nearly 20 percent loss at one point during 2018's final quarter, marking its worst performance since 2008. If you're looking for steady growth you can depend on for extra spending cash, maybe even travel funds, you might be better off opting for a stock index ETF or mutual fund. Nike has shown it's just as susceptible to the extreme ups and downs of the retail business market as any other brand.
May be overvalued
Nike's stock value has grown significantly in recent years, and not everyone is convinced that the rate of growth represents actual company value. Some analysts suggest waiting until the stock falls to $66 per share, then snapping up some shares and holding them for the long-term. Not all forecasters are convinced that overvaluation will take a hit on stock prices in the next 12 months, but the median growth forecast among 31 analysts suggests that growth will slow this year. On average, analysts have kept Nike stock's "buy" rating, but not everyone is convinced that it'll live up to its current price.
Uncertainty in China
Trade tension between the U.S. and China is one of the most pressing political and economic issues of our time. Any developments, positive or negative, have a huge impact on the whole stock market. That's especially true for Nike, which controls about a fifth of the Chinese sporting goods market. Sales there helped Nike beat 2018 sales estimates, but if the trade tension continues Nike may not see as many sales in China throughout 2019. A crucial deadline in the trade dispute is on March 1. If Chinese and U.S. negotiators don't strike a deal by then a truce on new tariffs will expire, and that could slow international trade. Nike would certainly feel the impact of that economic downturn (as would most of the stock market). On the other hand, if a deal is struck you may expect Nike's stock to enjoy a substantial boost on the expectations of Chinese sales growth.
How Do I Buy Nike Stock?
This article is a great starting point for research, but dig deeper before considering yourself fully informed. Seek out strong opinions, both positive and negative, and compare their points to concrete data from Nike's earnings reports.
Review your portfolio
Even if you decide Nike is a good bet, that doesn't mean it'll fit into your overall financial portfolio. Depending on your financial situation, you might be better off spending your time planning to reduce debt. If you're ready to invest but already heavily exposed to retail stocks, you might want to think twice about adding Nike until you've balanced that out a bit.
Pick a broker that fits your trading strategy
Broker fees vary from institution to institution, but they all have their own benefits and drawbacks. Some offer more research tools and smoother user experiences in exchange for higher broker fees. Others cater to beginning traders by reducing (or eliminating) broker fees, but those brokers may not be as many stocks to choose from or information about those stocks. If you're looking to invest small amounts, consider a broker that lets you buy partial shares of a stock. Luckily, everything is digital these days, so you may not even have to leave your house to find your ideal broker.
Pick an order type
Once you decide how much you want to buy, you need to decide whether you want to place a market order or a limit order. Market orders are the quickest, so this is the best type of order to place if you're trying to take advantage of current events. Even though it's quick, there is a delay. During that delay the actual price of the stock – and the price of your purchase – may rise or fall. If you want a more certain price place a limit order. Whatever your preferred method of investing, this will be the final step before acquiring the stock.
Set reminders to revisit your investment (if you decide to buy)
Buying shares doesn't mean you can stop planning for the future. Remember to check back in on your investment and follow company developments. Set price reminders so you can sell if the stock's value gets too inflated or buy more if the stock's value dips.