Buy This, Not That: The Athletic Giant Tunning Away With the Competition

Shah Gilani|January 15, 2025

A Note From Amanda: In your Buy This, Not That video below, Shah looks at two of the big athletic wear companies… but he’s discovered an even more compelling opportunity in artificial intelligence. He’s been tracking a company that’s quietly building an AI empire – with more patents than Microsoft, Google, and Tesla combined. Yet it still trades at a significant discount to other tech giants. On March 18, a major announcement could change that dramatically. Details here.

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“Quitter’s Friday” has come and gone…

But the race for market dominance in the athletic wear segment continues.

From profit margins to market share, see which athletic giant deserves your investment dollars.

One company’s growth story might surprise you.

Get all the details in this week’s “Buy This, Not That” video.

Click on the thumbnail to dive in.

TRANSCRIPT

Hey, everybody, Shah Gilani here with your weekly BTNT, as in Buy This, Not That.

It’s a little past the second Friday of January. And what is the second Friday of January known as? I didn’t know this until someone told me.

Quitter’s Friday. The second Friday after New Year’s Day is when everyone’s New Year’s resolutions start falling apart. You know those resolutions – to lose weight, exercise more, save money. You’ve made a few yourself, haven’t you?

For this week’s BTNT, following Quitter’s Friday, I’m going to discuss running shoes and athletic shoes. For those of you who made resolutions, maybe I want to remind you of them. If you should exercise more, you might need some new athletic shoes for the gym.

The two major players in that space are, of course, Nike, the big player, and Adidas, as my German friend tells me it’s properly pronounced.

Let’s start with Nike. I’m going to show some charts because they tell a different story than you might expect regarding which one to buy. I’ll give you my conclusion at the end, and it’s going to be a bit different this time.

Looking at Nike’s one-year chart – it’s downright ugly. Here’s why: Nike has a $106+ billion market cap, revenues over $50 billion annually, and a 10.6% profit margin. Impressive numbers, but quarterly revenue growth over the last 12 months is negative 10.4%. Quarterly earnings growth is negative 27.5% over the trailing 12 months.

The trailing P/E is 22, so Nike looks relatively cheap, especially compared to Adidas’s trailing P/E of 112. But there’s more to the story. Nike’s forward P/E is 34, while the trailing is 22. That suggests earnings are likely going lower. Adidas, conversely, goes from 112 trailing to a forward P/E of 34.

Looking at Nike’s five-year chart: in November 2020, it traded at about $180. Now we’re at $70. That’s concerning. Even when the stock was oversold, it didn’t recover significantly.

Adidas (ADDY is the American Depositary Receipt symbol) has a better-looking one-year chart. Its market cap is $43.6 billion, with revenue at $22.5 billion – about half of Nike’s. The profit margin is 1.88%, significantly lower than Nike’s 10.6%. However, its quarterly revenue growth rate is 7.3%, with quarterly earnings growth at 71% over the trailing 12 months.

Regarding debt, Adidas has $5.58 billion in debt and $1.78 billion in cash. Nike is in a better position with $12.13 billion in debt and $10.29 billion in cash. Both have strong cash flow.

My recommendation? Consider both. I’d pick Adidas for its revenue and earnings growth, despite the lower profit margin. If the trailing P/E moves from 112 to a forward P/E of 34 based on earnings growth, you want to own Adidas.

However, I also like bottom fishing. The market’s shaky, but you could put a tight stop on Nike and buy some shares. For longer-term plays, consider LEAPS or call spreads 6-9 months out. Maybe look at the 75-80 call spread, or 80-85 call spread. For more aggressive traders, consider 85-90 calls with longer expiration dates.

While this isn’t my primary sector of interest, I would invest in both with tight stops on Nike for a bottom-fishing play. For a longer-term, lower-stress investment, I’d choose Adidas. Consider splitting your capital between these two trades, but don’t overcommit to either position.

That’s it for this week’s BTNT. I’ll catch you next week. Cheers, everyone. Don’t quit on me. Don’t quit on yourself.

Note: Speaking of market leaders and profit opportunities, I want to share something important with you…

While we just analyzed athletic wear giants, I’ve discovered an even more compelling opportunity in artificial intelligence. Like Adidas versus Nike, sometimes the best investments aren’t the most obvious ones.

I’ve been tracking a company that’s quietly building an AI empire – with more patents than Microsoft, Google, and Tesla combined. Yet it still trades at a significant discount to other tech giants.

On March 18, a major announcement could change that dramatically.

Just as we saw in our athletic wear analysis, market leaders in growing industries tend to reward early investors handsomely. This AI opportunity could be even bigger.

Click here to get the full story.