Nike, Unable to Avoid COVID-19 Impact but Expects Rapid Recovery Upon Rebound

[Asia Economy Reporter Eunmo Koo] Nike's stock price has returned to the level of one year ago due to the impact of the novel coronavirus disease (COVID-19), but an analysis suggests a rapid rebound is expected during recovery. Meanwhile, the ongoing trend of fashion sportswear and the surge in home training demand are seen as opportunity factors.

According to Samsung Securities on the 11th, Nike's stock price temporarily fell to about 40% of its peak along with the sharp decline in the US stock market. Valuation also temporarily dropped to the low point seen during the intensification of the US-China trade dispute. Researcher Eunhye Lim of Samsung Securities emphasized the importance of paying attention to the recent stock price retracement period in her report on the same day.

Researcher Lim stated, "During the valuation rebound phase, the relative premium compared to the market expanded, and there is high expectation for the 2021 fiscal year earnings per share (EPS) reflecting the second half performance of this year," adding, "This is judged to reflect market investors' confidence in Nike's fundamentals, making this adjustment phase an opportunity for medium- to long-term investment."

Although Nike cannot avoid the impact of COVID-19, it is evaluated that a rapid rebound is expected upon recovery. Researcher Lim said, "Investor concerns about the Chinese market, which accounts for 16% of sales, were largely resolved through strong earnings announced on the 25th of last month, but concerns remain for the next quarter as the spread of COVID-19 in North America, which accounts for 40% of sales, is still ongoing." She added, "Market consensus also reflects this, expecting the impact to peak in the second to third quarters of this year and sales normalization to begin from the end of this year."

The ongoing fashion sportswear trend and the surge in home training demand are evaluated as opportunities. Researcher Lim said, "The sportswear market, which has been experiencing high growth for several years, is leading global fashion market trends, and the current COVID-19 situation is not a factor that would undermine Nike's growth appeal."

She also predicted that social distancing would drive home training demand, highlighting Nike's strength in digital channels. Researcher Lim said, "Digital channel sales currently account for 20% of Nike's sales," and forecasted, "In the post-COVID phase, Nike's relative attractiveness compared to Adidas will be emphasized."

This content was produced with the assistance of AI translation services.