Nike : Opportunities in E-Commerce And Why The Stock May Be Headed Higher


Nike (NYSE:NKE), over the past couple of quarters, has been shifting its strategy. Moving away from traditional brick and mortar retail, to focus more on the direct-to-consumer and e-commerce model.  The recent push into the digital space resulted in Nike’s digital sales increasing by a total of 36%. As Nike plans to move to direct-to-consumer it will focus on 12 key cities initially: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan.

We currently have a price estimate of $80 per share, which is 4% higher than the market price. You can use our interactive dashboard How E-commerce Will Shape Nike’s Revenues  to modify key drivers and visualize the impact on Nike’s price estimate.

Relevant Articles
  1. Will Johnson & Johnson Stock Rebound To Its Pre-Inflation Shock Highs of $185?
  2. Should You Pick Eli Lilly Stock After A 4x Rise In Three Years?
  3. Down 9% This Year, What’s Next For Lululemon’s Stock Past Q4 Results?
  4. Down 14% In The Last Trading Session, Where Is Adobe Stock Headed?
  5. Will Higher Federal Government Spending, Gen AI Drive Digital Security Stocks Like CrowdStrike Higher?
  6. Up 30% In A Year Is FedEx Stock A Better Pick Over UPS?

 

With international sales accounting for 55% of Nike’s revenues, markets such as Latin America, China, and Asia-Pacific are expected to drive Nike’s revenue. Therefore, as Nike focuses on its digital business we can expect business to start seeing the benefits of the shift in strategy in the coming quarters.

Nike has increasingly moved to partner with key online players to boost its digital presence. In 2017 it signed a key deal with Amazon to move into the online space. In China it has partnered with Tmall, a subsidiary of e-commerce giant Alibaba, to further its digital footprint. Sales in China grew 20% annually in China and Tmall is expected to provide further impetus.

We believe the move into the digital space will be key to bringing in key customers going forward, whom Nike has been increasingly targeting, as traditional demographics start to mature. E-commerce will be key in driving sales towards this demographic. This focus is a part of a broader initiative to focus and retain what Nike calls ‘younger athletes.’  Those between the 15-25 age group represent 20% of Nike’s sales.

Furthermore, Nike has increasingly moved its marketing strategy away from traditional media owing to its younger base consuming less, and has focused less on traditional top-down  channels. This is further backed by moving away from a strategy of focusing on a ‘core’ message, to the more recent story-telling approach.

In conclusion, Nike’s revenue mix will increasingly focus on both digital and retail.  By focusing on digital, the company believes it will be able to both improve its access to targeted demographics and improve its earnings. With momentum from e-commerce and improved margins, we believe the company’s performance should improve in the future.

 

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.