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Nike Is Fighting Back, But Adidas Is Still Heating Up

Apr. 12, 2018 11:10 AM ETNIKE, Inc. (NKE)ADDYY4 Comments
L&F Capital Management profile picture
L&F Capital Management


  • Nike is fighting back against Adidas, and NKE stock has rallied over the past several months as a result.
  • But the Adidas threat isn't going away any time soon; if anything, it's getting stronger.
  • The current valuation on NKE stock seems to neglect this still-rising competitive threat from Adidas.

Back in mid-2017, Nike (NYSE:NKE) stock was priced as if it were going to lose its spot atop the athletic retail market to surging Adidas (OTCQX:ADDYY). We said such concerns were overdone, and bought the dip in NKE stock because we viewed the company's dominance in athletic retail as something that would last into the foreseeable future.

Since then, NKE stock has been a big winner, rising nearly 30% and outperforming not only the S&P 500, but also peers Adidas and Under Armour (UAA). We feel, however, that this rally is largely over. Nike won't lose its spot atop the athletic retail market anytime soon, but the company also hasn't entirely quelled the Adidas threat. If anything, Adidas is only growing stronger, and at these levels, there isn't much more room for NKE stock to run higher while Adidas continues to gain mind-share. As such, we think investors should avoid NKE stock here and now due to the still-rising Adidas threat.

ChartNKE data by YCharts

Much like its signature athletes (LeBron James and Michael Jordan) are in the NBA world, Nike is the best-in-class in the athletic retail world. The company has built the world's most recognizable and popular athletic retail brand by creating high-quality products, leveraging high-profile athlete endorsements, establishing a wide and unparalleled global distribution network, and investing big in the right high-growth areas. Because of this, Nike has time and time again fought off competitors who have tried to dethrone the athletic retail king.

A few years back, Under Armour tried to dethrone Nike by using an underdog narrative with NBA superstar Stephen Curry as their spokesperson. It worked. For a while. But eventually, Stephen Curry and Under Armour faded in popularity, and Nike won out with its wide-moat.

This time around, Adidas is knocking on Nike's door. And

ChartADDYY data by YCharts
ChartADDYY Cash and Equivalents to Market Cap (Quarterly) data by YCharts
ChartADDYY Revenue (Quarterly YoY Growth) data by YCharts

ChartADDYY Revenue (Quarterly YoY Growth) data by YCharts

ChartNKE EV to EBITDA (TTM) data by YCharts

This article was written by

L&F Capital Management profile picture
L&F Capital Management, LLC, is a quantitative investment management group located in San Diego, California. Our multi-strategy investment approach comprises a mix of event-driven trades and long-term value investments, utilized together to maximize profit in both short and long term scenarios. We maintain consistency in portfolio mix through our long-term value holdings, but stress flexibility in portfolio mix from our daily event-driven trades. We believe this mix of flexibility and value generates both short and long term profits while reducing exposure to market volatility. L&F also shares various trade and investment opportunities through Seeking Alpha. For more information, visit www.lfcapitalmanagement.com.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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