Breakingviews - Moutai will raise a glass to its LVMH moment
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 02 2025
0mins
Should l Buy NKE?
Source: Reuters
Kweichow Moutai's Strategy: Kweichow Moutai is looking to attract younger consumers by diversifying its product offerings and potentially acquiring the struggling sportswear brand Li Ning, aiming to create a Chinese equivalent of LVMH amidst a challenging economic environment.
Market Challenges and Opportunities: Despite a significant drop in sales and market value for both companies due to economic pressures, a merger could capitalize on the growing preference for domestic brands in China, with Moutai having substantial cash reserves to facilitate such an acquisition.
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Analyst Views on NKE
Wall Street analysts forecast NKE stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for NKE is 76.11 USD with a low forecast of 62.00 USD and a high forecast of 110.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
21 Analyst Rating
14 Buy
7 Hold
0 Sell
Moderate Buy
Current: 63.920
Low
62.00
Averages
76.11
High
110.00
Current: 63.920
Low
62.00
Averages
76.11
High
110.00
About NKE
NIKE, Inc. is engaged in the designing, marketing and distributing of athletic footwear, apparel, equipment and accessories and services for sports and fitness activities. The Company's operating segments include North America; Europe, Middle East & Africa (EMEA); Greater China; and Asia Pacific & Latin America (APLA). It sells a line of equipment and accessories under the NIKE Brand name, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment and other equipment designed for sports activities. It also designs products specifically for the Jordan Brand and Converse. The Jordan Brand designs, distributes and licenses athletic and casual footwear, apparel and accessories predominantly focused on basketball performance and culture using the Jumpman trademark. The Company also designs, distributes and licenses casual sneakers, apparel and accessories under the Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Nike's Market Reaction: Nike's shares surged in overnight trading following the Super Bowl ad, reflecting market optimism regarding the brand's revival, despite a nearly 10% decline in stock price over the past year, investors are hopeful about new CEO Elliott Hill's strategic repositioning efforts.
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- Layoff Expectations Rise: Converse CEO Aaron Cain indicated in an internal memo that the company would face layoffs due to continued revenue declines, although the exact number of job cuts remains unclear, highlighting the urgency of the brand's turnaround efforts.
- Nike Stock Volatility: Nike's stock fell 2.4% on Monday, though it is uncertain if this was related to the Converse news; analysts suggest that layoffs could lower costs and boost profits, leading to mixed investor reactions.
- Brand Future Uncertainty: Converse currently accounts for only 2.5% of Nike's revenue, and management has not clarified whether the brand will be sold, despite Nike's history of divesting other brands; analysts remain cautious about Converse's future, emphasizing that revitalizing the brand is crucial for stock price improvement.
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- Layoff Plans: CEO Aaron Cain mentioned in an internal memo that difficult decisions had to be made, including saying goodbye to employees, although the exact number of job cuts remains unclear; this move reflects the severe challenges the brand is facing.
- Brand Restructuring: Since Elliott Hill took over as CEO, Nike has been working to rebuild relationships with key retail partners and refocus on sports, yet Converse's performance has become a pain point in this transformation process, potentially impacting Nike's overall profitability.
- Uncertain Future: Although Converse accounts for only 2.5% of Nike's revenue, analysts speculate about the possibility of its sale, given Nike's history of divesting other brands; management has not addressed this issue, highlighting the complexities of the brand's restructuring efforts.
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- Remote Work Directive: Employees at Converse have been instructed to work from home ahead of an upcoming all-team meeting, a measure that not only reflects internal uncertainty but may also affect team morale and productivity.
- Brand History and Market Position: Founded in 1908, Converse once held over 60% market share in the basketball shoe market during the 1950s and 1960s with its All Star sneaker, but has recently faced challenges due to limited product innovation and increasing competition, impacting its market performance.
- Nike's Strategic Shift: Since being acquired by Nike in 2003, Converse has become a global brand; however, it now faces significant challenges within Nike's portfolio, particularly due to a lack of innovation beyond the core Chuck Taylor line, which could lead to a decline in brand value.
See More
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- Significant Revenue Decline: Converse reported a 30% year-on-year revenue drop in Q2 2026, totaling $300 million, reflecting weak sales across all territories and highlighting the brand's competitive pressures that necessitate strategic adjustments to regain growth.
- Layoffs and Team Restructuring: The company is implementing layoffs while also planning to add new roles and reshuffle some staff teams, as CEO Aaron Cain mentioned in an internal memo about these “difficult decisions,” aimed at enhancing team efficiency and market responsiveness.
- Executive Departures: The strategic changes have led to the departure of several senior executives at Converse, which could impact the company's leadership and decision-making processes, further exacerbating uncertainties in the brand's market position.
- Remote Work Arrangement: During this strategic transition, Converse has asked employees to work from home this week, a move intended to minimize operational disruptions while preparing for an upcoming all-team meeting to communicate the company's future direction.
See More
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