Nike vs. Allbirds: Which Athletic Footwear Stock Is a Better Buy?

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.

The bull case for Nike

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.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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