Nike (NKE) traded at $147 in January. The stock has since fallen to $132. However, it remains higher over a longer period.
Those who have been patiently waiting for NKE to slide have an interesting buying opportunity right now. NKE could easily appear in the coming weeks, returning to the $150 level in anticipation of strong selling from the reopening of the economy, the return to school and a surge in consumer spending. Nike sales were negatively impacted by lower foot traffic at retailers.
Where does NKE go from here? Will the stock breach its 52-week high or fall to $120 or even lower? Let’s find out what the future holds for this footwear powerhouse.
NKE Points to note
Based in Beaverton, Oregon, NKE has been in business since the late 60s. NKE’s shoes are certainly popular, but the company also sells accessories, apparel, equipment and services. In total, NKE is present in more than 160 countries.
NKE has a forward P/E ratio of 42.17. This is a pretty high forward P/E ratio, especially for a company that sells sneakers and apparel as opposed to high-tech solutions. However, the high forward P/E ratio is partly the result of NKE shares trading around $15 off its 52-week high of $147.95. The stock’s 52-week low is $84.11.
The retail boom that will unfold this spring will undoubtedly support NKE. Although NKE suffered a winter sales slump, it has the potential to rebound as life gradually returns to normal, and consumer confidence and related spending rise in unison. NKE’s revenues fell about 1% over the winter, reversing the trend from the 7% increase in the previous quarter. NKE executives quickly made it clear that the drop in sales was unrelated to demand, which remains strong. On the contrary, NKE has had shipping issues related to the ongoing pandemic. Fortunately, NKE executives are confident that these shipping issues will be resolved in the coming weeks. Rising prices and growing online sales with relatively high margins further increase NKE’s profitability.
Of particular note, NKE recently announced that it was revealing refurbished sneakers and athletic shoes that have been cleaned up and brought back to market at a lower price. This sales support strategy seems questionable at best. The Nike Refurbished sneaker line will initially launch in just over a dozen locations across the United States. However, it should come as no surprise that the program fails, as most consumers aren’t interested in wearing smelly, stained, and scuffed sneakers worn by others.
The analysts’ view on NKE
Analysts are in love with NKE, setting an average target price of $164.62 for the stock. The high analyst target price for the stock is $189 while the low is $118. Of the 36 analysts who have issued recommendations for NKE, 12 consider it a strong buy, 19 consider it a buy, three consider it a hold, one considers it a sell and only one considers the stock a strong sell. .
NKE POWR Rankings
NKE has an overall POWR B rating, meaning it’s a buy. The stock has B’s in the Momentum, Quality, Sentiment and Growth components. Click here to learn more about how NKE ranks in the Value and Stability components.
Of the 33 listed companies in athletics and recreation, NKE is ranked 19th. Overall, the Athletics & Recreation category has an A rating. You can read more about stocks in this segment by clicking here.
Is NKE a smart investment?
Indeed, NKE is a smart investment. NKE has strong branding and pricing power. It was able to use the pandemic to boost its digital sales and was able to offset much of the drop in retail sales. Today, retail sales are poised to explode, while its digital sales channel will drive the company’s future growth.
Add to that the fact that NKE ranks well in the POWR ratings and there are even more reasons to buy this stock. Investors should feel perfectly comfortable loading NKE shares as we approach the final months of spring and early summer.
NKE shares were trading at $130.76 per share on Wednesday morning, down $1.35 (-1.02%). Year-to-date, NKE is down -7.38%, compared to a 12.15% rise in the benchmark S&P 500 over the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investment experience, particularly in the information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. After…