St. John’s University Student Managed
Investment Research Equity Research
April 4, 2004 Recommendation: Sector: Industry: BUY
Consumer Cyclical Footwear 76.64 78.56 49.60 263.12M .80 20.17B 10,697M 21.66% $94.85
Price: 52 – Week High: 52 – Week Low: Shares Out (mil): Dividend: Market Cap: 2003 Revenue: Project EPS Growth: 2005 Target Price:
Rudy Dermesropian firstname.lastname@example.org Jason A. Drago Jdrag636@stjohns.edu Gintare Grigaite Gintare.email@example.com Tennille Lopez Tennille.firstname.lastname@example.org • • The stock is currently undervalued at a price of $76.64. Our 2005 target price is $94.85. In 2003, NIKE reported revenues of $10.7 billion, an 8 percent increase from FY'02. The best year of the company's 31-year history. NIKE is ranked # 1 in the footwear industry NIKE’s Market Capitalization is 20.17B compared to 2.49B of leading competitor Reebok and 334.60M for the entire Industry. Net income had risen 61% as demand for sneakers surged in March of 2004.
We are recommending the purchase of 150 of shares of NIKE on limit order at $70 and 150 shares at market order for the following reasons: • • • • We have set the target price at $94.85, based on our P/E average of 24.70 by our 2005 estimated EPS of $3.84 The stock is currently undervalued at a price of 76.64 (April 4th 2003). Our calculations indicate that Nike’s intrinsic value is $88.10 The continuous increase in dividends throughout the years The 21% increase in third quarter revenues and the expectation of higher figures for the overall year.
NIKE, Inc. is engaged in the design, development and worldwide marketing of footwear, apparel, equipment and accessory products. It sells its products to approximately 18,000 retail accounts in the United States and through a mix of independent distributors, licensees and subsidiaries in nearly 200 countries. NIKE's athletic footwear products are designed for specific athletic use, although some of its products are worn for casual or leisure purposes. The Company creates designs for men, women and children. Running, basketball, children's, cross-training and women's shoes are the Company's top-selling product categories. NIKE also markets shoes designed for outdoor activities, tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling, cheerleading, aquatic activities, hiking and other athletic and recreational uses. NIKE sells active sports apparel that covers most of these categories, athletically inspired lifestyle apparel and others. Index membership: S&P 500 Sector: Consumer Cyclical Industry: Footwear Employees: 23,300
1957: Phil Knight and Bill Bowerman meet at the University of Oregon 1962: Phil Knight and Bill Bowerman founded Blue Ribbon Sports with the purpose of making quality American shoes and started out by selling their shoes from a car at the side of tracks to athletes and people who are interested 1963: Sold shoes from a manufacturer in Japan called Onitsuka Tiger 1972: Name changed to NIKE Inc, which was derived from the Greek goddess of ironically paid only $35 for her design. The team also convinced marathon runners at Olympic Trails to wear NIKE shoes and this resulted in strong advertising especially when several runners were some of the top finishers. Popularity continued to grow throughout the 70s 1979: By this time NIKE had 50% of the US running shoe market 1980: NIKE goes public 1988: Famous slogan “Just do it” introduced and company acquired Cole Haan. Throughout its existence, NIKE endorsed and sponsored different athletes like Michael Jordan the famous basketball player or Tiger Woods the young outstanding golf player 1995: NIKE acquired a license to place its logo on NFL uniforms
1992: Opens it first NIKETOWN store and a few years later, it acquired Canstar Sports, which included hockey equipment maker Bauer. 1997: NIKE launched the Jordan brand of athletic shoes and...
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