Sometimes bad things happen to great companies and their stocks pull back quickly. Last week, Nike retreated 20% after the balance sheet, which has actually been in decline for a long time and has now reached almost a third of its peak. So, what is happening in Nike, is it worth investing in Nike, can I see a turnaround story in Nike? I will try to share all these with you. Normally, since I am a technology investor, Nike is not really in my area of ​​interest. But from time to time I open swing trades for such companies. So I can invest in comeback stories. What do I mean by this? I will explain a little more through the PayPal example a little later. So, is there such an opportunity at Nike? Can I buy Nike lists from here? How to decide this? I will try to explain to you what to look for in order to serve as an investment lesson. It's definitely not investment advice, but I'm sure it will interest you.

Let's look at Nike's price action first. The price per share reached its peak in November 2021, reaching $177, and has been in constant decline since then. The last day the last balance sheet came out, it fell by 20% with such a strangely harsh red candle. It's recovering slightly this week. But the comeback has not been achieved yet. Nike's total market value is $114 billion. After this decline, it is almost unbelievable that the market lost roughly 20 billion dollars of value in a single day. The loss in the last year is around 30%. It has lost 29.96% since the beginning of the year. Price divided by earnings forward is 23.77, so we cannot say that it is still a very cheap company. Wall Street analysts are buying and selling. Seeking Alpha analysts say, Seeking Alpha is a special platform, I use it a lot in my analyses, they say keep it. When we look at it mathematically, Quant also gives similar data. Again, when we look at Seeking Alpha analysts, most of them made analyzes such as hold or sell.

So what is Nike's problem? Let's look at the numbers first and then come to the story. Nike's main problem is that growth has stopped. They reported a turnover of 12 billion 606 million in the last quarter. The same quarter last year was 12 billion 825. So there is a decline here, around 2%. Of course, 2% is not an incredible decline, but turnover has not been growing here for a long time. This is starting to bother Wall Street. When we look at the gross profit, there is a gross profit of 5 billion 634. In fact, this is quite positive, compared to the same quarter of the previous year, it was 5 billion 595. There is an increase in profits. In other words, while sales decreased by nearly 2%, they increased gross profit by nearly 1%. This shows that the company is doing the right things in terms of being run more efficiently. Sales and marketing expenses of 4 billion 88 are 6% below last year. Other business activities 4 billion 88 again. It is about 6.5% below last year. The operating profit is 1 billion 546. This is 1,221 in the same quarter of the previous year. Here we see a 26% increase, extremely successful. When we look at the net profit, there is a net profit of 1.5 billion. 1.31 in the same quarter a year ago. So, there is a 45% increase here too. In other words, the company has suffered a very slight loss in turnover growth, but there is a significant increase in stability. But despite this, Wall Street is not happy.

One of the main reasons why Wall Street is not happy is the losses on the shoe side, which is the most important product for Nike. There is a loss of around 3.6% compared to the same quarter last year. Yes, Nike has other products, but this is the biggest place. 8 billion 237, almost half of the turnover, comes from shoes. Good loss here. There is a small increase on the clothing side, 2.8%. There are also products called other equipment, their share in the total turnover is only 578 million dollars. There is a 34% growth there, but when we look at the total turnover, there is a slight decrease compared to the same quarter last year and a slight growth compared to the previous quarter. But turnover growth has now stopped at Nike. But there is no such bad result here. So why did the stock drop 20%? One of the reasons for this is the company's future predictions; They predicted a 10% decrease in turnover in the next quarter compared to the same quarter last year. They say that they have difficulty selling certain product groups, and one of the most important issues is that they need some major changes in their business models and innovation models. So the company's growth has stopped. They increased efficiency internally, cutting roughly 1,500 jobs. About 2 months ago, it reflected well on profitability. But Wall Street is worried, saying what if this company can't grow at all.

Another issue fueling Wall Street's growth fears is the growth of competitors. For example, there is a rapid growth in Deck, it shows a growth of around 18.21%. Onon showed a growth of 33.66% year on year. Sketchers is up 8.17%, Under Armor's growth is only -3.41. But Under Armor is a once-great star brand that has been in trouble for a long time and its stock has fallen very hard. I still like their products very much, I don't know why they don't like them in America. But in the end he couldn't pull himself together. When we look at future growth, Nike predicts a growth of 0.55% in a year, and remember, it predicted a shrinkage in the next quarter. On Deck it is 13.55, on Onon it is 34.64, on Sketchers it is 9.61. So Wall Street sees the story like this; Yes, the general slowdown in the markets may affect Nike a little, but Nike also has problems compared to its main competitors.

And of course, there are many brands that I haven't mentioned here; there is Adidas, Puma, Asics, dozens of other brands. According to these, it seems like there is a problem in Nike's growth. The market doesn't like it either. When we look at the profitability side, we see that Nike's gross profit remains below competitors such as Deck, Onon and Sketchers. In other words, Nike's profitability has increased slightly compared to last year, but the performance of its competitors is much better. All of this, of course, scares Wall Street. So what's the story? Why did Nike get into these problems and, more importantly, can it get out of them? We need to talk about this now.

The root of Nike's problems lies more or less in the backlash of a major strategic change they embarked on in 2019. What is the strategic change here? At that time, the previous manager, Mark Parker, left the job and a new CEO named John Donahoe arrived. In fact, Nike is a very well-established company, but its only fourth CEO in total is John Donahoe. So the founder is Phil Knight, after that there is a manager in between, I don't remember his name, then Mark Parker, then John Donahoe. But there is a difference between them: the first three CEOs are all people from shoe background, especially the last CEO, Mark Parker, is a shoe designer. Phil Knight is the person who designs, markets and sells shoes himself, and so is the CEO. John Donahoe is a completely different character. John Donahoe is an online sales guru who previously worked at companies such as eBay, PayPal and ServiceNow.

So such a change is coming to the soul of the company. Nike is starting to transform from a brand that designs good products, has deep relationships with athletes and athletes, knows good marketing, and is on the field, to an online retailer. The decision of the board of directors at that time called it the Consumer Direct Acceleration program and determined the Direct to Customer business as the main strategy of the company. For this reason, they are increasing their own stores. They are designing 4 new store formats and also developing 4 applications to increase online sales. They are designing brand new websites and in 2019 they are showing immediate results. About 20% of the turnover goes online. Then the pandemic breaks out. When the pandemic broke out, Nike's preparation gave great results and Nike achieved great sales during the pandemic period. During this period, online sales rise up to 30% for a while, and Nike is very impressed by its success here, and from there, things start to get a little difficult.

Nike says that since I can sell in this way through my own stores and online sales, my online sales will soon reach 35% in my own stores, I will not work with other retailers anymore. For example, Foot Locker is one of the largest in the USA. Nike decides to come out of all this. He says he can handle his own business and eliminates one third. It is starting to reduce the range of products it sells to others. That's when things get complicated. Because Covid is over and when Covid is over, consumers start going to stores again and a very sharp contraction in demand for Nike's online store begins. When you go to stores, many retailers no longer have Nike or their shelves have shrunk. Of course, competitors have filled the places he left on the shelves. This makes it very difficult for Nike to reach customers. But the matter does not end there.

Remember, during the Covid period, there were many supply chain problems, products could not be delivered to companies, etc. Products that could not be delivered to Nike during the Covid period are suddenly being delivered and Nike's inventory is swelling. Its inventory is swollen with some old models. Coming to peaks of $9.5 billion. Nike is a company that operates with an average inventory of around 6 billion dollars. What kind of situation do we have now? We have moved online, there is a serious shrinkage online. We have exited most of the retailers we cooperated with. He's trying to return, but they won't give him the old shelves. So it's not such an easy transition there either. We have a large inventory and some of that inventory is outdated. Meanwhile, new shoe brands are starting to become fashionable among the youth.

I think the products that Nike currently has in its stores attract a little less attention from the consumer. Of course, they still have very successful products such as the Air Jordan series. Some of their products are sold like rare collector's items. Let me also point out that Nike is still the world's largest sports shoe manufacturer with a market share of over 30%. But there seems to be a certain loss in that quality of being fashionable and cool, and Nike needs to reverse that. So Nike needs to innovate again. It needs to be cool again, and that's not an easy process. Because in a market where competition has increased incredibly, Nike is trying to draw a comeback story, and the worst part is that the CEO who manages the comeback story is someone far from fashion and sports, he is an online marketing manager.

That's why I have question marks in my mind about Nike. Because I think sometimes brands lose their essence. What was the essence of Nike? The tradition that started with Phil Knight, making great running shoes for example. They have serious losses in the running shoe market. Then they got into lifestyle shoes. There, I see my daughter buying lifestyle shoes. For example, he chose Adidas Samba, and when I look around, we see that Adidas Samba walks very fast. For myself, I haven't bought any Nike products for a long time, I either buy New Balance or Sketchers. Of course, these are very anecdotal matters, but it is certain that there is no Nike craze like there was when I was young. When you look at the new youth, they are not very interested in this either. Apparently, this is the case in America, where Nike shoes are heavily discounted. It has become the most discounted brand in America and cannot renew itself.

This is the situation now. There is obsolescence in their products. It needs to change its sales marketing model again. It needs to design new products for sales through other brands through shops outside its own distribution channel, and on the other hand, sales are declining. On the one hand, they laid off 1500 people. There is probably a low morale among the staff and most importantly, they have a CEO who is far from fashion and sports. I don't think their job is easy. Of course, Nike is a giant brand, giant brands can come back. Nike's playing field is very wide and all the world's famous athletes want to work with Nike. For example, they recently made an important signing with an important athlete. Female basketball player Caitlin Clark is a very popular basketball player in America right now. They lost Tiger Woods, the famous golf player, but somehow Nike has to make a big effort to be cool and I'm not sure if this current management team is up to it.

Nike's size, Nike's advertising power, its financial power, we are still talking about huge numbers. It is a company that still knows marketing very well. All of this can yield returns. But from what I've seen, I think these are difficult without a top management change at Nike, and I know that if the stock of a US-related company falls so hard, its CEO will eventually be punished. So they give you another quarter, two more quarters of opportunity. They saw that new innovative products were not coming out, there was no recovery in sales, the CEO changed. There may be an opportunity for revival towards the change of that CEO. So, when we look at it in this context, is Nike a good investment opportunity? Nike is still not very cheap, it would be useful to take a look at it once.

When we look at the valuation, price divided by earnings is 20.30 for the last 12 months, and the industry average is 17.29. So we don't have such a free situation, we are going somewhere close to the industry. Looking ahead, price divided by earnings is 24.27, which is still well above the industry average of 16.08. PEG GAAP, that is, price divided by earnings divided by growth, when we look at the future, its forward is 3.28, its competitors in the market are 1.46. It is already well above its competitors and receives D minus in total valuation. In this context, we cannot say that Nike is very cheap. I don't think there is such deep value in Nike yet and that it is worth making a big investment. On the other hand, the price dropped sharply, there may be a Bounce Back from here. Maybe if they can announce a few positive numbers next quarter, especially in shoe sales, or they're launching a new product line, now they're even launching two new product lines. If they can show there's a demand for it, the stock could make a comeback.

But frankly, I think there are better opportunities in front of me. So I'll pass on Nike. But here, as an investor, you should not act like me. You must do your own analysis. If you are someone who understands sportswear and sportswear, perhaps you have a deeper view of Nike's products than I do. Maybe you'll look into it, or maybe you know things about Nike that I don't and maybe you might find Nike attractive. But as far as I can see right now, Nike is not yet suitable for my investment style. I'm also afraid to enter a swing trade here.

My swing trading is coming to its ninth month on Paypal. There was a similar situation with Paypal. There was bad management. However, PayPal is a very well-established, large company. In other words, PayPal is to online payments what Nike is to sneakers. But there was a very bad manager. He made very bad acquisitions, dissolved the company and broke it up. Then I thought he would be kicked out and I started investing for him. As a matter of fact, the manager was fired just a month after I invested. A new friend came, a friend named Alex, a young friend, an energetic friend. We have been seeing its balance sheets for two quarters. To be fair, he had just taken over the job for the first quarter. These numbers started to move a little last quarter. But it seems like it's still at least a quarter or two away, and it's hard to be sure whether it will be successful in the end.

In other words, in swing trades, the value of a share has fallen due to poor management or a wrong decision, but we believe in a story that this can come back and we follow that story. I believe the Paypal swing story. It is not investment advice and it is an investment that has gone bad so far. I have an average cost of 67 - 68 dollars, the current price is 58 dollars. So there is nothing to praise about this. But I think Alex should have 2-3 more quarters, that is, around 6 months, in front of the new CEO to implement what he said. If he succeeds, I think the stock will rise above 100 dollars and he will sell from there and separate the shares. Because these are not the structures I want to be in in the long term.

Because I like companies that create rapid growth, have monopolistic characteristics, and create technological revolutions. PayPal does not fall into that category either. Of course, Nike doesn't either, but Nike's swing trade story doesn't sit well with me. But the story that Paypal might come back is more appealing to me. Nike hasn't gone to bed yet, there's a high probability that the CEO is a man far from being able to do this. On the other hand, Nike is a very strong company and we continue to follow it closely. I hope it caught your attention. Please do not take what I say as investment advice. I just tried to give perspective. I hope it was useful.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.