Undervalued · +29.0% margin of safety
Market outside MC distributionMarket $44.67 vs DCF $62.92. Even at the 5th-percentile Monte Carlo outcome ($46.96), intrinsic value exceeds today's price by 5%.
What it sells, where it sells
Operating segments — TTM revenue $46.52B
NIKE Brand (Footwear / Apparel / Equipment) + Converse. Modeled consolidated; Footwear carries the brand premium.
Country mix (revenue-weighted)
Quality profile & the two-sided argument
A five-axis read on the DCF's load-bearing assumptions, plus the bull-vs-bear case distilled into anchor bullets.
Quality snowflake (each axis 0–6)
The two-sided case
- Lowest-conviction outperform in the watchlist. This is Damodaran's reference run (8.4% Y1-5 growth, 13.36% Y10 margin) — not bottom-up original analysis. The MoS is real but unearned in research depth.
- Wide moat anchors the case. Brand premium durability across 60 years; 200-300bp operating-margin premium to Apparel-industry median (9.1%) has held through prior cycles.
- No governance friction, no overrides needed. Investment-grade balance sheet (A1/A+, net-cash), no controlling shareholder, mature capital-return discipline. Clean inputs flow through to clean output.
- MoS shrunk vs the 2024 gold case. $62.92 DCF vs $44.67 market = +40.8% — solid but materially below the +60-80% range when stock troughed. Recovery has eroded the asymmetry.
- Watch, don't add at this level. Reference valuations should not be sized like conviction picks. Reserve dry powder for the next drawdown if specialty-brand share-loss thesis pressures the stock again.
- Specialty competitor share loss Hoka, On, Asics, New Balance erode runner/performance niches Nike walked away from; structural not cyclical.
- China decoupling / consumer weakness ~14% revenue; tariff or sentiment hits arrive fast and persist. Swing factor on +/- 5% MoS.
- Brand fatigue from clearance pricing Two years of inventory liquidation damages premium positioning; rebuild is slower than defense.
- FX translation drag ~55% non-USD revenue; sustained dollar strength compresses USD reporting.
- DTC inventory and channel-reset noise Margin lift thesis intact but quarter-to-quarter volatility through wholesale reload.
Thesis & open questions
Investment thesis
- Lowest-conviction outperform in the watchlist. This is Damodaran's reference run (8.4% Y1-5 growth, 13.36% Y10 margin) — not bottom-up original analysis. The MoS is real but unearned in research depth.
- Wide moat anchors the case. Brand premium durability across 60 years; 200-300bp operating-margin premium to Apparel-industry median (9.1%) has held through prior cycles.
- No governance friction, no overrides needed. Investment-grade balance sheet (A1/A+, net-cash), no controlling shareholder, mature capital-return discipline. Clean inputs flow through to clean output.
- MoS shrunk vs the 2024 gold case. $62.92 DCF vs $44.67 market = +40.8% — solid but materially below the +60-80% range when stock troughed. Recovery has eroded the asymmetry.
- Watch, don't add at this level. Reference valuations should not be sized like conviction picks. Reserve dry powder for the next drawdown if specialty-brand share-loss thesis pressures the stock again.
Key debates
Risks to thesis
Hoka, On, Asics, New Balance erode runner/performance niches Nike walked away from; structural not cyclical.
~14% revenue; tariff or sentiment hits arrive fast and persist. Swing factor on +/- 5% MoS.
Two years of inventory liquidation damages premium positioning; rebuild is slower than defense.
~55% non-USD revenue; sustained dollar strength compresses USD reporting.
Margin lift thesis intact but quarter-to-quarter volatility through wholesale reload.
Returning lifer with credibility, but margin recovery to 13.36% by Y5-7 is the load-bearing assumption.
10-year forecast
Revenue + FCFF on the left axis; operating margin on the right axis.
Monte Carlo distribution
Mean $60.33 ± $8.48 · P(intrinsic < market) = 1.6% · 1000 iterations (0 failed).
Cost of capital build
| Risk-free rate | 2.15% | implied from CE − β·(ERP+CRP) |
| Mature-market ERP (assumed) | ~6.60% | Damodaran 2026 global |
| Levered β | 0.8669 | |
| Weighted CRP | 0.90% | country mix × per-country |
| Cost of equity | 8.65% | |
| Pre-tax cost of debt | 3.45% | synth rating Aaa/AAA |
| WACC | 8.09% | |
| Terminal growth | 3.72% | |
| Terminal ROIC | 15.00% |
Full year-by-year DCF
| Year | Revenue | Op mgn | EBIT | EBIT(1−t) | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | $48.85B | 6.9% | $3.36B | $2.62B | $672M | $1.95B | $1.80B |
| 2 | $51.29B | 7.7% | $3.97B | $3.09B | $705M | $2.39B | $2.04B |
| 3 | $53.86B | 8.6% | $4.63B | $3.60B | $741M | $2.86B | $2.27B |
| 4 | $56.55B | 9.4% | $5.34B | $4.16B | $778M | $3.38B | $2.48B |
| 5 | $59.38B | 10.3% | $6.11B | $4.76B | $816M | $3.95B | $2.67B |
| 6 | $62.35B | 11.1% | $6.95B | $5.37B | $857M | $4.52B | $2.83B |
| 7 | $65.46B | 12.0% | $7.86B | $6.03B | $900M | $5.13B | $2.98B |
| 8 | $68.46B | 12.0% | $8.21B | $6.26B | $864M | $5.39B | $2.90B |
| 9 | $71.30B | 12.0% | $8.56B | $6.47B | $820M | $5.65B | $2.82B |
| 10 | $73.95B | 12.0% | $8.87B | $6.66B | $766M | $5.89B | $2.75B |
Methodology & flags
Damodaran FCFF DCF, 10y explicit + perpetuity. R&D capitalisation: OFF · Lease capitalisation: OFF · Failure-rate adjustment: OFF · ESO subtraction: OFF.