Bargain Value After Drop? By TipRanks
Athletic apparel giants Adidas (OTC:) and Nike (NYSE:) have been under considerable selling pressure this past week amid supply chain issues.
ADDYY, and NKE stocks are currently down about 21%, and 16% respectively from recent highs.
Adidas and Nike, two companies with legendary brands are undoubtedly of high quality. Both their managers and growth stories are extraordinary.
They will see COVID-19’s headwinds diminish and their supply chains return to normal in the shortest time possible. What will happen to supply chain disruptions? Will they be permanent, like lockdowns?
However, both Nike and NKE are companies I believe in, especially Nike. (See NKE stock charts on TipRanks)
Supply Chain Woes May Be Overblown
Demand for footwear and other athletic apparel is still robust. It will prove difficult to satisfy such high demand due to limited supply. Just because there is less supply, it is not likely that demand will decrease.
In fact, there is a chance that the surge seen in 2021’s first half could be sustained at some future date. A surge in demand may fuel another quarter of record sales at an unknown time over the coming years.
The quarters for Adidas and Nike will remain ugly. But they will not be able to show the true demand for their product. Although much of the demand won’t be met, those who have enough patience could find incredible deals with both these names.
Long-term drivers still at play
Nobody knows when the pandemic-induced supply constraints will weigh down Nike and Adidas. Long-term investors that focus on the future several years rather than the immediate quarters may have the greatest chance to win.
Their e-commerce initiatives have brought in significant profits for Adidas and Nike. It’s a long-term story, Direct-toConsumer (D2C), and it is still in full swing. Margins and sales will continue to rise as each company eliminates the middleman.
Loyalty programs and simple return policies will help to boost digital strength and increase margins. We will see if Nike passes the savings on to customers to boost sales. It is possible that Nike will find the best balance between sales and margins at some time in the future.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, NKE stock comes in as a Strong Buy. From 22 analysts ratings there are three Hold recommendations and 19 Buy recommendations.
The average NKE price target is $185.14. The average analyst price target is $185.14.
Disclosure: Joey Frenette did not hold shares of any companies listed at publication.
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