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Consumer Discretionary. Reza Aditya Hakan Altan Adam Barrick Peter Manuselis. Agenda. Sector Recommendation Recap Stock Selected Overview Financial Analysis Valuation Analysis Stock Recommendation. Current SIM Holdings. Sector Recommendations Recap.

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consumer discretionary

Consumer Discretionary

Reza Aditya

Hakan Altan

Adam Barrick

Peter Manuselis

agenda
Agenda
  • Sector Recommendation Recap
  • Stock Selected Overview
  • Financial Analysis
  • Valuation Analysis
  • Stock Recommendation
sector recommendations recap
Sector Recommendations Recap

Recommendation: Hold the Underweight Position at 8%

nike overview
Nike Overview
  • 2006 Revenue $14,955 MM (8.8% increase from ‘05) 
  • 2006 Net Income $1,392 MM (14.9% increase from ‘05)
  • 2006 EPS $2.64 (17.9% increase from ‘05)
  • 52 week range: $37.76 – $55.10
  • Completed a 2 – 1 stock split on April 2, 2007
  • Current Price as of 5/14/07 - $52.87
  • 1.4% Div. Yield
catalysts
Catalysts
  • Strong market position and brand
    • Number one shoemaker, holding a 40% market share of the global footwear industry
    • World’s largest manufacturer of athletic apparel
    • Nike swoosh sign is one the most widely recognized logo
    • Relatively inelastic demand
  • Robust financial performance
    • Strong cash position that will provide funding for future expansion strategies
  • Strong product portfolio
    • Reduced dependence on footwear and has established a strong position in the equipment and apparel markets
    • Offers specialized sports gear for sports including golf, hockey, skateboarding, and cycling
    • Allows them to spread risk across its product segments
financial analysis
Financial Analysis
  • Stock price,
  • Revenue/share,
  • EPS are increasing.
financial analysis9
Financial Analysis
  • Relative to Consumer discretionary sector
  • Stock price,
  • Revenue/share,
  • EPS are increasing.
financial analysis10
Financial Analysis
  • Dividends/share
  • are higher compared to Cons Disc.
  • Growth rate estimates are going up compared to Cons Disc.
slide11

Valuation Analysis – 5yr

CU < ME

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CU > ME

Trending Down

CU > ME

Stable

CU < ME

Trending Down

valuation analysis 5yr
Valuation Analysis – 5yr

CU < ME

Trending Down

slide14

Valuation Analysis - 10yr

CU < ME

Stable

CU > ME

Trending Up

CU > ME

Stable

CU < ME

Stable

valuation analysis 10yr
Valuation Analysis – 10yr

CU < ME

Trending Down

stock recommendations
Stock Recommendations

Recommendation: Buy

risks
Risks
  • Rising raw material cost
    • Rising oil prices increase the price of synthetic rubber and plastic based products. Increasing raw material cost would increase the production cost and its profitability.
  • Chinese products
    • Chinese footwear has been flooding the EU and can significantly affect Nike’s market share in the EU
  • Intense competition
    • The launch of technologically superior products by competitors such as Adidas could lead to a fall in the company’s market share
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