Nike, Inc.

NKE Details

Gain in First Quarter Profits: Nike, Inc. (NYSE: NKE) is a multinational corporation, engaged in the designing, development, manufacturing, and marketing and sales of footwear, apparel, equipment, accessories, and services. As on 22 September 2020, the market capitalization of the company stood at ~US$182.30 billion.

Quarterly Performance (For the Period ended 31 August 2020): The company has recently announced the results for the first quarter of FY21, wherein it reported a fall of 0.7% in revenue to US$10.59 billion from US$10.66 billion in the pcp. For the first quarter, NIKE direct sales were $3.7 billion, up by 12% on a reported basis and digital sales increased 82% with double-digit growth across North America, Greater China, and APLA and triple-digit growth in EMEA. In the same time span, the company generated a net profit of US$1.52 billion as compared to US$1.37 billion in pcp and reported diluted earnings per share of US$0.95, up by 10% on the pcp. These results demonstrate the company’s competitive advantage and its strengthened position amidst the COVID-19 pandemic. During the first quarter, the company reported a healthy balance sheet with a cash balance of US$9.5 billion, up by US$5.8 billion in the pcp, due to proceeds from a corporate bond issuance.

Quarterly Financial Highlights (Source: Company Reports)

Outlook: The company is recovering fast because of the acceleration in brand momentum and digital growth. It is focusing on driving investment in capabilities, which is likely to fuel its digital transformation, catalyzing long-term growth and profitability.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: NIKE has a decent track record of investing and is consistently increasing returns to shareholders with higher dividend payouts for 18 consecutive years. The company’s strength along with its digital acceleration is unlocking the strength for the long-term market potential. As per NASDAQ, the stock of NKE is inclined towards its 52-weeks’ high level of US$120.48. The stock of NKE gave a return of 14.66% in the past three months and a return of 6.48% in the last one month. On the technical analysis front, the stock of NKE has a support level of ~US$80.21 and a resistance level of ~US$120.76. We have valued the stock using the price to earnings multiple based illustrative relative valuation and have arrived at a target upside of middle single-digit (in % terms). Considering the current trading levels, decent results amidst the COVID-19 uncertainty and modest long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of US$116.87, up by 3.09% on 22 September 2020.

NKE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Twitter, Inc.

TWTR Details

WebMD and Twitter Announce First Health Content Partnership: Twitter, Inc. (NYSE: TWTR) is an American microblogging and social networking site that offers products and services for users, advertisers, developers, and data partners. As on 22 September 2020, the market capitalization of the company stood at ~US$33.79 billion. The company has recently announced a partnership with WebMD for content collaboration. This partnership will inform consumers on various health topics and feature patient stories on managing chronic conditions and other health issues.

Quarterly Performance (For the Quarter ended 30 June 2020): During the second quarter ended 30 June 2020, the company has reported a growth of 34% in Monetizable Daily Active Usage (mDAU) to 186 million. In the same time span, the company witnessed a decline of 19% in revenue to US$683 million, reflecting moderate recovery in advertising demand relative to the last three weeks of March. The company is accelerating its performance with a larger audience, resulting in higher costs and expenses to US$807 million. Lower revenues and higher expenses resulted in an operating loss of US$124 million.

Stock Recommendation: The company has recently unveiled its first interactive celebratory camera- Bud Light Showtime Cam. This gave a unique fan experience to its customers. TWTR is likely to release the results for the third quarter on 29 October 2020. As per NYSE, the stock of TWTR is trading close to its 52-weeks’ high level of US$44.20 but retains the potential for further growth. The stock of TWTR gave a return of 29.83% in the past three months and a return of 8.83% in the last one month. On a technical front, the stock of TWTR has a support level of ~US$37.12 and a resistance level of ~US$43.98. Considering the current trading levels, decent returns in the past one month, and partnership with WebMD, we recommend a ‘Hold’ rating on the stock at the current market price of US$42.73, up by 7.09% on 22 September 2020.

TWTR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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