Nike vs. Allbirds: Which Athletic Footwear Stock Is a Better Buy? – December 6, 2021
The global footwear market size was $271.82 billion in 2020 and it is expected to reach $328.02 billion by 2027. That’s a predicted compound annual growth rate (CAGR) of 2.4% during 2021-2027.
Athletic footwear make up a large part of this market. In 2020, the global athletic footwear market was valued at $99.61 billion and it is expected to grow at a CAGR of 4.56% from 2021-2026.
With that in mind, today I’ll analyze Nike (NKE) and Allbirds (BIRD) to determine which stock is currently the better buy. While Nike is an established brand valued at a market cap of $270 billion, Allbirds is a much smaller player that recently had an IPO and is valued at just $2.4 billion.
Despite its massive size, Nike continues to grow at a rapid pace. In its fiscal first quarter of 2022 that ended in August, Nike reported sales of $12 billion, an increase of 16% year over year, despite ongoing supply chain disruptions and pandemic-related restrictions.
Around $4.7 billion was derived from Nike Direct which was 30% higher than the year-ago period. A surge in online sales allowed the company to increase net income by 23% to $1.9 billion.
Nike also announced a dividend hike of 11% as its quarterly payout stands at $0.315 per share, indicating a forward yield of 0.72%.
In fiscal 2020 that ended in May, Nike’s sales fell by just 4% to $37.4 billion showcasing the company’s resiliency in an extremely challenging environment. In fiscal 2021, its sales rose to $44.5 billion and are forecast to touch $47 billion in fiscal 2022 and $53.7 billion in fiscal 2023.
Comparatively, analysts expect adjusted earnings to expand from $3.56 per share in fiscal 2021 to $4.75 per share in fiscal 2022.
Nike is optimistic that digital sales will continue to power top-line growth moving ahead which will also drive profit margins higher.
The bull case for Allbirds
Allbirds stock went public last month after pricing its IPO at $15. The stock touched a record high of $32.44 per share and is currently trading at $14.19.
In the third quarter of 2021, Airbirds reported sales of $62.7 million which was an increase of 33% year over year as the company opened four new stores in Q3. At the end of Q3, its total store count stood at 31. However, Allbirds reported a net loss of $13.8 million which was wider than its year-ago loss of $7 million.
The company has increased sales from $193.6 million in 2019 to $219.26 million in 2020. Wall Street expects sales to touch $273 million in 2021 and rise to $355.8 million in 2022. Allbirds is also forecast to narrow its losses from $0.5 per share in 2021 to $0.27 per share in 2022.
The verdict
Despite the recent pullback, BIRD stock is still valued at a much higher valuation compared to Nike. But it’s also growing at a far higher pace.
Personally, I would place my bets on Nike given its robust balance sheet, widening profit margins, strong brand recognition, and rising digital sales. On the other hand, I believe Allbirds will remain range-bound over the next few quarters, especially if it misses consensus revenue and earnings projections going forward.
NKE shares were trading at $169.29 per share on Monday morning, down $0.95 (-0.56%). Year-to-date, NKE has gained 20.56%, versus a 23.64% rise in the benchmark S&P 500 index during the same period.
Author: Aditya Raghunath