Nike stock is up 27% YTD and 51% LTM

30x P/E represents the highest valuation multiple for Nike since 2001 and eclipses the 2015 peak of 28x when revenue was growing 13% y/y

Pre-2014 the stock traded in a band between 15x and 20x.

Since then it's traded from 20-25x. So the current multiple is 25-50% higher than normalized

Why is the valuation multiple so high? The company has accelerated revenue growth from 4% in CY 2017 to an estimated 9% in CY 2018. Accelerating a company this size is indeed impressive and they appear to be gaining share from competitors - namely, Under Armour.

However, profitability growth has not kept up. Fiscal 2018 earnings growth was -5% as the company increased investment to drive revenue growth. Consensus believes these investments will then be curtailed; earnings are estimated to rebound and grow 17% in CY 2019 and then 21% in CY 2020 as these investments pay off.

My short thesis is threefold:

1. Revenue growth will be disappointing as the company loses share to competitors after wading headlong into politics

2. Margins will disappoint as the company will have to increase investment to drive revenue

3. At 30x P/E the company has zero room for error and must not simply meet expectations but clobber them. I don't believe they will

I think the stock does something like 2.80 in Fiscal 2020. 20x that is a $56 stock for 30% downside. Upside the stock does 3.25 and gets 30x for a $97.50 stock for 22% upside. 3:2 reward to risk

I typically don't do consumer stocks but think the market will underestimate what the company has just done to itself similar to how they underestimated EA

I will be incorrect if this all blows over and people move on. However, with the NFL season about to start, Nike being the sole sponsor of the NFL, and anthem protests likely to continue the entire season, pissing off half the consumers in the country, I think this risk is mitigated

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36742812)

I do know regular 30 year old+ people still buy jerseys, clothing, and shoes

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36742845)

This is what the kids want

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36742913)

EXPLAIN

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36998921)

But yeah the options do look expensive

Maybe sell OTM calls and buy OTM puts and make it costless

You can sell Jan 19 $100 calls for 30c

But I don't do much with options given I need to sling more money around

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36742968)

Pro-Kaep people will still buy Kaep jerseys

Anti-Kaep people won't buy shit

Nike has huge growth expectations - even a hiccup and the stock will drop. I don't need the business to implode or anything, I need it to miss high expectations

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36742945)

dumb move on nike's part

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743817)

I'm not a fan of Nike's brand in general,

but if you're betting against their intelligence in positioning their brand

I'd take the other side of that bet

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743354)

Has Nike ever been a force for good in the world though?

They've been selling shoes by pissing on the social fabric of the world forever.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743465)

https://www.youtube.com/watch?v=nMzdAZ3TjCA

they've always been past the current state of the social decay

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743505)

(its ok, I know I am)

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743583)

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743485)

Nike wants to sell them merchandise

logical argumentation doesn't have anything to do with it

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743520)

kids are resourceful for a few hundred bucks when they want to be

------

Nike's entire business model revolves around being savy about exactly how far to push the envelope

They're smarter at this than Hillary Clinton's campaign managers

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743556)

I'm not a fan of Nike's brand in general,

but if you're betting against their intelligence in positioning their brand

I'd take the other side of that bet"

Long term maybe you're right, but shorting long term is retarded. Short term this stock is priced for utter perfection. I'm not saying Nike is going to implode. I'm saying Nike at its current valuation has to shoot the moon and this could stop them from doing so

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743680)

I suspect Nike is savy about managing their brand though.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743770)

Past precedents of companies going shitlib and getting nailed for it are: BUD, EA, DIS, and the NFL

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743668)

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743882)

I'm no fan of Nike

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743904)

If I'm going to lol at any post of yours it'll be the Oregon Ducks making the playoffs one from this weekend

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743900)

Don't think I said theyre going to the playoffs tho

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743910)

https://www.scmp.com/business/china-business/article/2158813/china-retail-sales-fall-july-blow-government-plan-have

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36743832)

I used a NKE short to fund an AVGO long position. Yep, great call

Bump this in 6 months and we'll see how things have shaken out

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36780336)

https://morningconsult.com/form/nike-kaepernick-report/?

A new report from Morning Consult reveals consumer opinions of Nike have shifted rapidly since announcing their new campaign with former NFL quarterback Colin Kaepernick. Across nearly every demographic, perceptions of Nike’s brand have fallen, including among key consumer groups.

The report features over 8,000 interviews conducted among American adults, including 1,694 interviews pre-campaign launch (8/26/18 – 9/3/18) and 5,481 interviews post-campaign launch (9/4/18 – 9/5/18). Additionally, Morning Consult conducted a study among 1,168 adults in the U.S. about Nike’s ad and the decision to choose Kaepernick as the face of the campaign.

Key Findings

Nike’s Favorability Drops by Double Digits: Before the announcement, Nike had a net +69 favorable impression among consumers, it has now declined 34 points to +35 favorable.

No Boost Among Key Demos: Among younger generations, Nike users, African Americans, and other key demographics, Nike’s favorability declined rather than improved.

Purchasing Consideration Also Down: Before the announcement, 49 percent of Americans said they were absolutely certain or very likely to buy Nike products. That figure is down to 39 percent now.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36781345)

https://projects.fivethirtyeight.com/pollster-ratings/

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36781439)

By all means bump this in 6 months if Nike is trading at $100.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36781448)

I don't need this to tank sales. I need it to stop Nike from reaching already high sales expectations

Nike currently trades at a 72% premium on a P/E basis to the S&P 500. This is down from a 22% premium last year. To justify that they need to knock the cover off the ball.

Hitting a double when the market expects a home run and the stock will go down

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36781538)

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36803714)

i know it went up after Kaep announcement but its way too early to decide how this move is going to affect NKE stock

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36825774)

Shares down 4% to $81

Guidance on call

Guidance will be key

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886727)

i'm also in long/short and ur thesis is fucking pitiful. all u do is look backwards at historical multiples roflmao. dude ur no better than new constructs and those other retail spambots that talk about multiples. every shitty thesis is focused around multiples, i.e. yours.

figure out beats and misses bro. what's price doing? price is king in retail.

u guys don't even use credit card data? geolocation data? pure shit fund.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886843)

I'm looking for NKE to have less market cap in a year than it does now while offsetting that with a company I bet will have a larger market cap in a year than it does now. If Nike is flat in an up market I'll take that too

Guidance is on the call, which starts at 5. Nothing matters until then really except they didn't Q2 crush numbers when they should have (World Cup benefit)

xoxo

hth

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886867)

i bet ur at T3 or some other scam prop casino calling urself a HF.

stay out of retail, the big boys have data u won't believe.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886872)

xoxo

hth

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886890)

2. ignore 1, they were right.

from last quarter to now, if u were tracking credit card data, stock is up from $70 to $85. Today $83.

I would suggest you look for a new PM that can teach you how HFs really work.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886921)

You overlay credit card transactions with the stock price? Do you do a regression too? Wow! Man I never thought of that!

Tip: NA sales were up 6%, not flat

xoxo

hth

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886931)

chinese credit card data wasn't that good.

are u deliberately retarded?

ur shit thesis works even less well when i copy your style

"OOOH YOU LOOKED AT HISTORICAL MULTIPLES AND DETERMINED IT WAS OVERVALUED? OOOH JUST IGNORE PRICE AND MIX! CAN U TELL ME MORE STOCKS THAT ARE 30X AND I SHOULD SHORT? SO AUTOMATED! WOW WHAT A GREAT HEDGE FUND UR AT CAN I INVEST?"

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887212)

NKE at $84.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36892968)

good call no nke

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36886998)

You get a bounce and then it will die

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887025)

Need this to crack <$100 to get paid

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887127)

CEO oddly didn't mention Kaep in his remarks

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887294)

Blaming on FX

Q2 guide lower than consensus

Still have not talked Kaep

Update: completely dodged Kaep and said they got lots of social media interaction

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887416)

Shares down 4% to $81 AH

Management was evasive with respect to Kaepernick and China tariff impact. Soft Q2 guide likely due in part to a combination of this + FX.

Them not explicitly addressing any impact of Kaepernick to their guidance is fishy. They could have killed the controversy by stating it accelerated sales. They didn't.

Will be interesting to see how this trades in the coming days. Beat/raise momentum is gone

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36887600)

Was at $83-$84 most of day.

NKE @ $85 today.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36901873)

just think ur process is a joke

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36907384)

This short was never about the next quarter but about the next 12 months

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36984120)

has nothing to do with NKE.

i'm short furniture myself, cogs are 50% from china and will get destroyed. i.e. HVT, RH.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36984526)

RH alone squeezed up 60% in June

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36984535)

was a $160 stock in june, i got in at $150. check the price today?

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#37680907)

NKE as of 10.8.18: $80

Change: 0%

Vanguard Consumer Discretionary Index as of 9.4.18: $181.57

Vanguard Consumer Discretionary Index as of 10.8.18: $170.92

Change -6%

Would've generated alpha via long NKE and short VCR.

Just because you didn't lose money due to tariffs doesn't mean you added any value. NKE was actually one of the worst names to short vs. furniture guys or apparel.

At any factor neutral fund you'd be fired already. Negative 6% alpha in 1 month and you're levered 2x so -12% rofl gtfo.

You trying to take a victory lap over dumb lolyers doesn't mean people in the industry can't see how bad of an investor you are.

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36984541)

You're the one bumping this every day victory lapping when the stock was up while I've repeatedly stated its a long term short position. It's a good thing I don't work at a market neutral shop

(http://www.autoadmit.com/thread.php?thread_id=4068927&forum_id=2#36984556)