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Summary
- Q3 earnings season is about to start, handing out another report card on the global economy. Nike reports earnings this Thursday.
- Nike has a fantastic business model, but it also has the dubious honor of being one of the most socially/politically “active” companies in America.
- However, the main issue with Nike is how crazy the valuation got in 2021, hitting roughly 40x forward earnings last November.
- Nike is tightly tied with the fortunes of the global middle class, giving insight into how consumers in the US, Europe, and China are feeling.
- In the long run, Nike will keep making lots of money. I share what price I’d buy NKE stock.
Since its founding 50 years ago, Nike (NYSE:NKE) has built an empire out of shoes. Named after the Greek goddess of victory, the company has compounded capital at or near 20% annually for decades. To no one’s surprise, it turns out that making shoes for ~$25 and selling them for ~$100 is a great business. However, NKE’s stock has been absolutely crushed in 2022, down over 40% as of my writing this. This is one of the bigger drops among large-cap stocks. There are a few possible reasons for this, but the reason that makes the most sense to me is that the valuation got out of hand in 2021. NKE now appears to be approaching fair value.
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