If you follow football in the United States, you are well aware that the greatest free agent of our lifetime is currently working out with several teams to become the starting quarterback, leader and all around superstar for a new team. I'm talking of course about Peyton Manning.
Announced today, it appears that Peyton Manning will be headed to the Mile High City to play for the Denver Broncos. Other than the Green Bay Packers, which are owned by shareholders, there isn't another option to own a pro football team. I wrote in a previous article about buying shares of the Packers and how they offer no real benefit as they will not go up in value and not pay out dividends. If you are reading this article on Seeking Alpha, chances are you are an investor and I would like to present you with two ways to possibly profit from the Peyton Manning free agent signing.
The biggest winner in the Peyton Manning deal is Nike (NKE). Beginning in April, or April 3rd to be exact, Nike will unveil new jerseys for each of the 32 NFL teams. NFL fans will be looking to upgrade their favorite player jerseys into new official NFL Nike jerseys. The Manning signing in Denver will be no exception. In 2010, the last full season Peyton Manning played, Manning's jersey was the fourth most bought in the league. Coincidentally, in 2011 Denver's starting quarterback Tim Tebow was the second most popular jersey in the NFL. With Manning in town, Tebow is likely on his way out of Denver in a possible trade. My opinion is he will end up in Florida with the Miami Dolphins, but I'm not a general manager.
The question is not if but when Denver Broncos fans will replace their Tebow jerseys with Manning jerseys. I have no doubt that Manning will become the most popular player on the Denver Broncos team and will be their number one selling jersey for 2012.
The NFL has promised to make major changes to NFL jerseys for the first year of its new exclusive contract with the league. Nike has been making big changes to college football jerseys over the past few years as well. Sales of sports memorabilia remains a huge market for Nike, the leading sports apparel seller in the world. Nike beat out Rebbok, which held the exclusive NFL rights for the past 10 years, for the new five year deal which begins this year. No official amounts were released, but it is believed that Nike paid $35 million a year for the new NFL contract.
Reebok is the big loser from the new NFL deal. Reebok, was bought out by Adidas (ADDY.PK) and now represents a small portion of sales. Citigroup estimates that $350 of the $565 annual revenue from Reebok came from the sales of NFL merchandise. This is a big loss for Reebok, but the good news is that NFL merchandise only made up 2% of Adidas' total revenue for the year. It is of course worth noting that Peyton Manning does have a individual deal with Reebok for shoes.
Nike shares hit a 52-week high of $112.31 today. Shares should be bought on a pullback as the new NFL deal along with the Summer Olympics in London this year will make Nike a big winner for the year. Quarterly earnings will be announced on March 22nd for the first quarter.
The other big winner in the Peyton Manning and new NFL jersey sweepstakes is Dreams, Incorporated (DRJ). If you have read my articles for some time, you will know I am extremely bullish on this small-cap company. Dreams makes it way onto this list because its FansEdge website (here) is a leader in online sports memorabilia sales. A quick search for Peyton Manning on the website reveals 98 items for sale. I will note that all of the items are on clearance, as many of them include the Colts logo. Shares are at $2.85 at time of writing, which is above both my recommended prices of $2.63 and $2.19. In my last article on the company, I called for a $4 price target by December 2012. I think shares will approach that level sooner than later once the NFL season begins. Dreams is a clear winner from an increase in NFL jersey sales and should be thanking Nike for picking up the new NFL contract.
Besides the two clear winners in the Peyton Manning sweepstakes, there are several other companies that will benefit although on a smaller scale. Those companies are:
Mastercard (MA): Peyton Manning is paid to endorse Mastercard. Mastercard won big with signing Manning, despite Visa (V) being the official card of the NFL. I fully expect there to be a new Mastercard commercial featuring Manning once the Broncos deal is finalized.
Papa Johns (PZZA): Papa Johns is the official pizza of the NFL and it showcased several commercials during the Super Bowl featuring Manning and before the Super Bowl spending a lot of money on advertising among the most watched sport in America. Look for the company to continue its push into the NFL.
DirecTV (DTV): DirecTV counts Peyton Manning among its endorsed athletes. DirecTV offers the Sunday Ticket plan which ensures access to every NFL game. Look for the company to use Manning to show off its Sunday Ticket brand as it competes against cable companies.
Kraft (KFT): Kraft's Oreo brand is one of the most prominent Manning backers. The Double Stuff League was thought up by Oreo and featured Peyton Manning, Eli Manning, Serena Williams and Venus Williams. The commercials can't feature Peyton in an NFL jersey but look for them to capitalize on Manning's prominent focus from the media and his new fan base in Denver.
Pepsi (PEP): Gatorade, a Pepsi brand, has been a backer of Peyton Manning for a long time. Pepsi wins with Manning staying in the league and going to a new market.
CBS (CBS): CBS could become another big winner in the Manning free agent sweepstakes. CBS has the rights to broadcast AFC games. There is no doubt that there will be more Denver Broncos games broadcast on the network this year to capitalize on the new Manning mania.
DIS (DIS): Disney's ESPN brand remains the number one sports network. The Broncos played in one Monday Night Football match-up last year on ESPN. I will go out on a limb and say that the Broncos play in more than one Monday Night match-up for the 2012 season.
eBay (EBAY): Manning's trip to a new city creates a brand new marketplace for sports memorabilia and trading cards. EBay featured Linsanity auctions on the front page of its website for several weeks and would be smart to put Peyton Manning there over the next couple of weeks.
Peyton Manning receives $15 million in endorsements every year. After missing all of 2011 with an injury, the number of endorsements could pick up this season. Also, perhaps Manning can get some regional deals of Denver based companies on board. The season is far from starting but now could be the time to stock up on shares of Nike and Dreams before investors fully see the advantage of Manning's new home.