3 Reasons Nike Is a Must-Buy for Long-Term Investors

Core Viewpoint - Nike has faced challenges in recent years, leading to a decline in stock performance, but recent leadership changes and market dynamics present potential recovery opportunities for long-term investors [1][2]. Group 1: Company Challenges and Leadership Changes - Nike's previous CEO, John Donahoe, focused on technical strategies at the expense of long-term priorities, resulting in stalled sales growth and market share loss [1][3]. - Elliott Hill, a veteran of Nike, has taken over leadership and is working to rebuild retail relationships and improve product offerings [2][6]. - Nike's running business has shown signs of recovery, particularly with the Pegasus franchise, despite an overall revenue decline of 10% [4]. Group 2: Market Opportunities - The sports entertainment market is expanding, with significant investments in athlete contracts and broadcasting rights, which boosts demand for Nike products [7][8]. - The launch of ESPN's streaming app and Netflix's entry into live sports is expected to further increase demand for sports-related apparel and footwear [8]. Group 3: Stock Valuation and Recovery Potential - Nike's stock has decreased by 56% from its peak in 2021, but its price-to-earnings ratio stands at 25, indicating potential for growth as margins have fallen and revenue is declining [9][10]. - Operating income has dropped approximately 30% since 2021, but stock buybacks have been utilized to take advantage of the sell-off [10]. - Analysts predict a challenging year ahead, but a recovery could be initiated by simply meeting or exceeding estimates, allowing for a potential rebound in stock performance [11].