The Ratings Game: Nike’s Kaepernick ad to provide a long-term gain after some near-term pain, analyst says

The Ratings Game: Nike’s Kaepernick ad to provide a long-term gain after some near-term pain, analyst says

Shares of Nike Inc. sank in morning trade Tuesday, but Oppenheimer analyst Brian Nagel said any near-term “backlash” from its controversial ad featuring Colin Kaepernick should be overshadowed by the power of the message sent to its current roster of athletes.

The stock NKE, -2.65% slumped 3.0% in midday trade, enough to lead the Dow Jones Industrial Average’s DJIA, -0.27% decliners. It has now shed 3.8% since closing at a record $82.95 on Aug. 21.

Nike’s stock price decline shaved about 17 points off the Dow, which was down 75 points. See Market Snapshot.

Nike’s new ad campaign features Kaepernick, the former NFL quarterback who led player protests against racial injustice and police brutality by kneeling during the national anthem. Those protests from a growing number of players drew the ire of President Trump.

“No doubt, [Nike’s] decision to feature Kaepernick prominently in its latest marking effort will spur significant debate among those in athletic circles and more broadly,” Nagel wrote in a note to clients. “Our initial take: We commend Nike for its willingness to partake in a more edgy, risky advertising campaign while refreshing its 30-year old ‘Just Do it’ campaign.”

Nagel noted that Kaepernick has been on Nike’s endorsement roster since 2011, but has not been featured in a Nike ad in two years.

The Wall Street Journal reported his contract has been extended into a multiyear deal. He hasn’t played in a game since the 2016 season, and has filed a grievance alleging the NFL teams had colluded to keep him unsigned.

As Nike’s dominant market share has somewhat eroded recently, Nagel said the company is trying to use its extensive roster of athletes and their stories to reach a younger demographic. And he believes the new ad campaign is an effective way “to make some noise” in the industry, regardless of any political bent.

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Nike’s stock has run up 27.8% this year, outperforming the Dow’s 4.8% gain but underperforming rival Under Armour Inc. shares’ UAA, +1.12% 42.8% surge. But over the past 12 months, Nike’s stock has climbed 49.9% and Under Armour’s stock has advanced 25.8%.

“Over time, for [Nike], we think the power of the messaging from this new broader campaign is apt to overshadow any potential backlash, near term, in our view,” Nagel wrote.

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