Nike Worth Considering on a Pullback

6/26 - "The stock is down about 10% today as investors were spooked by aggressive SG&A spending surrounding the European soccer championship, the Olympics, the Sparq training launch, and investments in retail infrastructure. They were also concerned about the company's US market growth prospects.

Credit Suisse understands the worries and lowered their FY09 EPS estimate, but thinks investors aren't looking long-term:

'While Nike's strategy of spending more to grow more may turn off investors looking for instant gratification, we think the company's philosophy of underinvesting in mature markets and overinvesting in emerging markets will pay huge dividends in the long-run.'

6/26 - "NKE remains our top apparel & footwear pick, w/ solid brands and continued outperformance in an environment generally lacking in visibility. W/shares indicating ~5% down after mkt, we think the pullback creates an attractive entry oppty. Reiterate Buy."

"Nike reported $0.98, which was above consensus of $0.96. However, if we back out the sale of Bauer, Nike reported $0.94. Top line growth was better than expected but SG&A grew close to 33%...Global futures (i.e. future product demand) of +11% (+8% ex f/x) were in-line w/ consensus, which we view as a positive in light of current macro challenges. Asia and the Americas posted particularly impressive futures growth of 30%+. Importantly, Nike starts to lap easier US comparisons beginning in Q1’09 (over a comp of 3% in Q1’08), which should benefit global futures in 2009."

"Mgmt reiterated FY09 revenue guidance of high single digit growth, which we also view as a positive in the current environment. However, Nike today guided $0.10 dilution from the recent Umbro acquisition in FY09, as the co. invests in the currently unprofitable brand’s long-term growth and corrects Umbro’s core UK business."

"We are adjusting our FY09 estimate slightly to $3.90 from $3.93 based on higher than expected SG&A spend. Our FY10 EPS estimate remains the same at $4.45. Our target price remains $78."

6/27 - "Under Armour, founded in 1995, at first appealed to the serious athlete with its moisture-wicking synthetic fibers that help keep sweat and moisture from the skin and help regulate body temperature during strenuous exercise. Under Armour then discovered it was unwittingly creating a fashion statement. Like Nike, Under Armour is also crossing over to various demographic groups and weekend warriors as well."

"Nike will hit about $20 billion of revenues this year while Under Armour should approach $765 million. Nike has a market capitalization of $32.8 billion, which dwarfs Under Armour's $1.4 billion market cap. The opportunity for Under Armour is a faster, more sustainable growth rate of 20%+ for the next 3-5 years, as Nike should hold a steady 10% growth rate.

Under Armour has a global opportunity in front of it. Currently Under Armour sells in the United States, Canada, Australia and New Zealand. Nike has enjoyed a 31-year head start on Under Armour, but the world is ready for this emerging, strong second player."