Nike (NKE): Great Stock For Patient Longs

Yesterday, after the markets closed, Nike (NKE) announced it beat Q4 EPS estimates ($0.98 actual vs. $0.96 consensus) and sales estimates ($5.1 billion actual vs. $4.9 billion consensus). Great quarter, right? The market didn’t think so. 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. Though shareholders will have to trust that Nike’s penchant for pricey demand creation investments…will prove wise uses of capital.

This analysis is very consistent with Credit Suisse’s overall logic on Nike. They aren’t worried about the US because they see Nike as a bet on China.

Credit Suisse reiterates OUTPERFORM, target price $85.

See Also:
Want To Bet on China? Buy Nike.

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