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Letter To Nike Shareholders: Sell Now


Nike has been and continues to be a beloved, poster-child company for Wall Street and retail investors alike.

While it has consistently performed well and lived up to high expectations, recent developments make a bullish stance on Nike questionable.

This article will offer both qualitative and quantitative insights as to why Nike shareholders should sell now.

It pains me to write this article, as up until recently, I've loved Nike (NYSE:NKE) both as a consumer and as an investor. It produces quality, sought-after products, has established sponsorships and contracts with countless numbers of top athletes and celebrities alike, and has generally been seen as THE apparel company to own stock in. This fierce, sometimes irrational, love of the company is not without reason - shareholders have experienced a tremendous rate of return unmatched by that of any other apparel company and very few companies in general. It has grown without pause until only very recently in November 2015.

Like many others, I was certain that Nike would bounce back to all-time highs after the stock began to take a bearish turn in late 2015. Who in their right minds would doubt the tremendous selling power of the ubiquitous, almighty swoosh? However, after much research and observation, I have become bearish on Nike stock and will present my argument in a number of ways.

Fierce Competition from Under Armour (NYSE:UA) and Adidas (ADDY)

The first, and arguably most important, reason that Nike shares will decline in the future is simply fierce competition from every corner. Just a couple of years ago, if you wanted a performance running shoe, you purchased Nike Free Runs; if you wanted a stylish, casual comfort shoe, you bought a pair of Nike Roshes. Needed new shoes for the basketball court? You'd choose between Jordans or any number of signature shoes from Nike's impressive roster of NBA athletes, including LeBron James, Kobe Bryant, and Kevin Durant. There were simply no other competitive nor popular alternatives: Nike was the "it" brand, both in terms of coolness and performance. This is clearly reflected by its 5Y chart, as the stock had performed fantastically until very recently.

However, the scenarios I presented no longer hold true. The Adidas Ultra Boost, hailed by Complex Magazine as the greatest running shoe, has given Nike Running a serious run for its money, as highlighted in B. Riley's recent downgrade of Nike from "buy" to "neutral". Sold out everywhere and endorsed by megastars like Kanye West, the Ultra Boost has been hailed as an incredibly comfortable and stylish shoe that has managed to bridge the...