Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Commentary

Nike Inc. could be the World’s Best Marketing Machine

Most people get Nike Inc. (NYSE: NKE) wrong. They think Nike is just a maker of shoes and athletics wear. Instead, I consider Nike Inc. (NKE) one of the world’s best marketing machines.

For example, Nike’s latest marketing coup cashes in on the world’s two biggest stories at the end of July 2021. Hundreds of millions of TV and video viewers around the world saw US Olympic athletes wearing distinctive white masks emblazoned with the letters USA.

Nike makes the odd-looking masks and plans to market them. By placing the masks on American Olympians, Nike got tens of millions of dollars’ worth of free advertising.

Nike Gets Lucky

Nike generated enormous social media chatter about the Venturer Mask by making the mask similar to the facing covering worn by the Batman villain Bane in the movie The Dark Knight Rises. They list the Venturer Mask on Nike’s website but is not for sale yet.

Hence, Nike is cashing in on both the Olympics and the hysteria about COVID-19. Nike also got lucky because the Venturer is on the world’s TV screens just as the Centers for Disease Control and Prevention’s (CDC) new mask requirements became public.

Venturer Mask Courtesy Nike Inc.

Moreover, the media is full of hysteria about the Delta Variant of the SARS-CoV-2 coronavirus or COVID-19. Thus, Nike got lucky, but that luck is only the latest marketing coup at Nike (NKE).

Cynics, however, will ask if Nike’s luck translates into money. The financial numbers show it does.

How Much Money did Nike make in the Pandemic?

Nike Inc. (NKE) made enormous amounts of money during the pandemic. For example, Nike’s quarterly revenues grew from $6.318 billion on 31 May 2020 to $12.344 billion on 31 May 2021.

Additionally, Nike’s quarterly gross profit grew from $2.281 billion on 31 May 2020 to $5.655 billion to 31 May 2021. Impressively, Nike’s quarterly operating income grew from -$838 million on 31 May 2020 to $1.913 billion on 31 May 2021.

Notably, Stockrow estimates Nike’s revenues grew by 95.38% in the quarter ending on 31 May 2021. In comparison, Nike’s shrank by 37.96% in the quarter ending on 31 May 2020.

Nike’s Extraordinary Growth

Nike’s extraordinary growth goes beyond revenues. For example, Nike’s quarterly operating cash flow grew from -$1 million on 31 May 2020 to $2.012 billion on 31 May 2021.

However, the quarterly ending cash flow fell from $5.585 billion on 31 May 2020 to $1.373 billion on 31 May 2021. Most of the 31 May 2020 ending cash flow came from debt. Nike reported a quarterly financing cash flow of $5.801 billion on 31 May 2020. The quarterly financing cash flow fell to -$847 million on 31 May 2021.

Venturer Mask Courtesy Nike Inc

Nike’s total debt fell from $13.015 billion on 31 May 2020 to $12.813 billion on 31 May 2021. Thus, Nike paid debt and grew its revenues, gross profit, and cash flow during a pandemic.

Importantly, Nike (NKE) finished the pandemic with more cash. Nike’s cash and short-term investments grew from $8.787 billion 31 May 2020 to $13.476 billion 31 May 2021.

What Value Does Nike (NKE) have?

One person who noticed Nike’s extraordinary growth was Mr. Market. Mr. Market paid $100.94 for NKE on 5 August 2020 and $171.53 on 3 August 2021.

I think Nike’s financial numbers justify the $167.51 share price. To elaborate, the revenue and gross profit growth shows Nike (NKE) can make enormous amounts of money in the worst of times. Moreover, the Venturer Mask’s Olympic success shows Nike’s marketing is as effective as ever.

Additionally, Nike added value during the pandemic. Notably, Nike’s total assets grew from $31.342 billion on 31 March 2020 to $37.740 billion on 31 March 2021.

Nike is One of the World’s Best Marketers

Hence, I consider Nike a great growth stock with some value attributes. Notably, I think Nike was an undervalued stock that Mr. Market has noticed.

Plus, I consider Nike a respectable dividend stock. Notably, Nike paid a 27.5₵ quarterly dividend on 28 May 2021. The quarterly dividend grew from 24.5₵ on 8 August 2020. Overall Nike shares delivered a $1.07 Last Twelve Months (LTM) dividend and a 0.64% dividend yield on 30 July 2021.

If you are seeking an excellent growth stock in fashion and apparel, Nike (NYSE: NKE) is worth a look. I think Nike is a wonderful growth stock because it is one of the world’s best marketers.

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