A big talking point on Wall Street centers on Anheuser-Busch (NYSE:BUD) and its Bud Light brand partnering with a controversial social media star. Nevertheless, Nike (NYSE:NKE) waded into a far worse controversy yet overcame it. I am neutral on NKE stock as well as BUD stock. However, the main takeaway focuses on not overreacting to vocal criticisms.
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The Start of the Whole Mess
As part of its brand’s March Madness contest, Anheuser-Busch partnered with social media influencer Dylan Mulvaney. Known for documenting her gender transition on TikTok, the high-profile endorsement landed the Bud Light brand in hot water. Notably, conservative personalities such as country musician Kid Rock expressed umbrage at the promotion.
Interestingly, Wall Street analysts generally expressed positive views regarding BUD stock. However, criticisms against the underlying promotion only rang louder. Eventually, the uproar forced Anheuser-Busch CEO Brendan Whitworth to get in front of the controversy.
“We never intended to be part of a discussion that divides people,” Whitworth wrote in a statement issued last Friday. “Moving forward, I will continue to work tirelessly to bring great beers to consumers across our nation.”
To be fair, Anheuser-Busch suffers from a unique challenge. According to a 2014 article by The Washington Post, Republican voters tend to prefer Bud Light and other light beer brands compared to their liberal Democratic counterparts. Thus, the issue about BUD stock centers on ticking off its underlying core consumer base.
Nevertheless, Nike did far worse in the eyes of conservative critics, yet NKE stock fared well in the long run.
NKE Stock Represents a Benchmark for Handling Controversy
No stranger to controversy, Nike suffered hits to its reputation regarding forced labor issues. However, geographic distance represented a key “benefit” to these scandals. Basically, Americans were too far removed from the source of moral outrage. That all changed with a former NFL quarterback named Colin Kaepernick.
A few years ago, Kaepernick began kneeling during performances of the national anthem during NFL games to protest police brutality against people of color. Inherently, the matter sparked a huge division in American society. Many sympathized with Kaepernick as violent law enforcement encounters increased. However, others took issue with the optics associated with disrespecting the flag.
Boldly, though, Nike took the step of featuring Kaepernick in a video advertisement, which enraged right-wing pundits. Labeled as anti-American and anti-military, the iconic athletic apparel maker endured stinging rebukes and calls for a boycott. Nevertheless, Nike stood its ground and stood with Kaepernick.
Given the already-divided nation, the controversial move should have spelled lights out for NKE stock. After all, the popular conservative meme claims that if corporations go woke, they’ll go broke. Frankly, Nike went as woke as it’s possible to go, yet over the long run, it performed just fine.
Indeed, in the past five years, NKE stock has essentially doubled. Had it not been for the inflationary pressure of 2022, it probably would have surged much higher.
The Proof Lies in the Financials
Released in September 2018, Nike’s Colin Kaepernick ad incensed roughly half the population. Yet, in the company’s Fiscal Year (FY) 2019, which ended in May 2019, it posted revenue of $39.12 billion, up nearly 7.5% against the prior year. Following an understandable dip in FY2020, in FY2021, Nike generated sales of $44.54 billion. Go woke, go broke? Not Nike.
Also, it’s worth pointing out that in FY2019, net income reached just over $4 billion. This tally represented a 108.4% lift from the prior year’s result. And in FY2021, net income reached $5.73 billion. While this rabid success can’t all be attributed to the Kaepernick ad, it certainly didn’t hurt NKE stock.
In some ways, Nike making a strong stand probably endeared consumers of color to the brand. Put another way, Nike wasn’t just talking the talk; it was more than willing to walk the walk, facing the fire of right-wing ridicule that often targets the disenfranchised.
Monetarily, doing good represented a huge win for NKE stock. Therefore, it’s premature to slam Anheuser-Busch as a failed, out-of-touch enterprise.
What Do Analysts Think of NKE and BUD?
Turning to Wall Street, NKE stock has a Moderate Buy consensus rating based on 21 Buys, three Holds, and two Sell ratings. The average NKE stock price target is $140.75, implying 12% upside potential.
BUD stock also has a Moderate Buy consensus rating, which is based on two Buys and two Hold ratings. The average BUD stock price target is $72, implying 9.3% upside potential.
The Takeaway: Don’t Overreact to the Bud Light Controversy
To be 100% clear, this article should not be misconstrued as an endorsement or an attack on Bud Light’s endorsement of Dylan Mulvaney. Honestly, gender transition issues only impact a small segment of the population, and that’s really the takeaway here. Nike offended the patriotic sensibilities of roughly half the U.S. population, yet NKE stock thrived. Therefore, Anheuser-Busch should be just fine in the long run.
