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Consumer Discretionary. Reza Aditya Hakan Altan Adam Barrick Peter Manuselis. Agenda. Sector Recommendation Recap Stock Selected Overview Financial Analysis Valuation Analysis Stock Recommendation. Current SIM Holdings. Sector Recommendations Recap.
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Consumer Discretionary Reza Aditya Hakan Altan Adam Barrick Peter Manuselis
Agenda • Sector Recommendation Recap • Stock Selected Overview • Financial Analysis • Valuation Analysis • Stock Recommendation
Sector Recommendations Recap Recommendation: Hold the Underweight Position at 8%
Nike Overview • 2006 Revenue $14,955 MM (8.8% increase from ‘05) • 2006 Net Income $1,392 MM (14.9% increase from ‘05) • 2006 EPS $2.64 (17.9% increase from ‘05) • 52 week range: $37.76 – $55.10 • Completed a 2 – 1 stock split on April 2, 2007 • Current Price as of 5/14/07 - $52.87 • 1.4% Div. Yield
Catalysts • Strong market position and brand • Number one shoemaker, holding a 40% market share of the global footwear industry • World’s largest manufacturer of athletic apparel • Nike swoosh sign is one the most widely recognized logo • Relatively inelastic demand • Robust financial performance • Strong cash position that will provide funding for future expansion strategies • Strong product portfolio • Reduced dependence on footwear and has established a strong position in the equipment and apparel markets • Offers specialized sports gear for sports including golf, hockey, skateboarding, and cycling • Allows them to spread risk across its product segments
Financial Analysis • Stock price, • Revenue/share, • EPS are increasing.
Financial Analysis • Relative to Consumer discretionary sector • Stock price, • Revenue/share, • EPS are increasing.
Financial Analysis • Dividends/share • are higher compared to Cons Disc. • Growth rate estimates are going up compared to Cons Disc.
Valuation Analysis – 5yr CU < ME Trending Down CU > ME Trending Down CU > ME Stable CU < ME Trending Down
Valuation Analysis – 5yr CU < ME Trending Down
Valuation Analysis - 10yr CU < ME Stable CU > ME Trending Up CU > ME Stable CU < ME Stable
Valuation Analysis – 10yr CU < ME Trending Down
Stock Recommendations Recommendation: Buy
Risks • Rising raw material cost • Rising oil prices increase the price of synthetic rubber and plastic based products. Increasing raw material cost would increase the production cost and its profitability. • Chinese products • Chinese footwear has been flooding the EU and can significantly affect Nike’s market share in the EU • Intense competition • The launch of technologically superior products by competitors such as Adidas could lead to a fall in the company’s market share