I played competitive sports growing up. This included high school football and basketball teams, an AAU basketball team that played nationally, and football at the University of Miami. Unless things have changed drastically in the few years I’ve been off the pitch and the court, Nike has an absolute grip on the psyche of today’s athletes. And understanding its brand helps with a Nike stock forecast.
On the basketball court, Nike was the go-to shoe for kids on the court. And it wasn’t just shoes. Children wore Nike socks, Nike hoodies, a Nike headband or wristband, and a Nike uniform. If you wore another brand of socks under your Nike shoes, you would run the risk of being laughed at.
I was playing football in Miami when we changed sponsors from Nike to Adidas. The pushback from our fan base on the move has been incredible. After the announcement, fans took to social media to complain. They insisted that the switch from Nike to Adidas was a sure sign that Miami football had “fallen” (whether Miami football has fallen is a subject for another time).
By the way, media companies continue to grow. Check out these top media stocks for other investment opportunities.
It didn’t matter that Adidas paid us triple what Nike was. Nike is the coolest brand, so our fans wanted Nike.
Founded in 1964 by Phil Knight, Nike originally started as Blue Ribbon Sports. Phil started Nike when he had the idea of importing athletic shoes from countries like China. It was cheaper to manufacture products overseas, which would allow it to compete with already established companies like Adidas. Today, Nike has a market cap of approximately $250 billion, its brand is valued at $32 billion, and it employs nearly 77,000 people worldwide.
So does this mean that every investor should add Nike shares to their portfolio? Or are the best days already over for Nike’s stock?
This article will do a quick prediction of Nike stocks and answer the question: Are Nike stocks a good buy?
NOTE: I am not a financial adviser and simply offer my own research and commentary. Please do your own due diligence before making any investment decision.
Nike Stock Analysis
There are a handful of companies in the United States that seem to have unlimited demand. For example, Disneyland has been incredibly popular for years, so you might think people are going to get bored of it. However, almost every new attraction it still opens sells out in minutes.
Apple is the same way. People literally camped out in front of stores to buy their first iPhone. 13 models later, almost half of all iPhone owners say they will upgrade to the latest iPhone 13.
Nike belongs to this same category.
I have no idea how many different styles of Jordan sneakers Nike has created over the years. All I know is that people seem to be equally excited about every pair that comes out. To give you an example of how this gets out of hand, I took a look at the sneaker site StockX. On this site, owners of rare Jordan sneakers can resell their shoes (like eBay but only shoes).
StockX currently has 240 pairs of Jordans sold for over $1,000 a pair. Around 70 pairs sell for over $5,000 a pair. the best selling pair received a maximum bid of $20,000. Furthermore, the Jordan brand grown up 31% in 2021 for a total of approximately $5 billion.
So, is Nike stock a good buy? Well, it is certainly cheaper to buy Nike stocks than to buy Nike sneakers.
A critical part of the sports industry is getting athletes to represent your gear. When it comes to sponsoring athletes, Nike dominates.
Nike Approves 79 out of 128 (61.7%) college football programs (but not in Miami!) as well as 17 of the last 19 national champions. As far as athletes are concerned, Nike has sponsored most elite athletes in the world for years. It’s to the point where it’s a newsworthy event when an athlete chooses to go with another brand.
So how does all of this affect Nike stock? Let’s take a look at some numbers as well as a Nike stock forecast.
Nike Stock Forecast
Since 2017, Nike stock has risen more than 200%. While sales fell a little in 2020, they have already rebounded strongly in 2021. Nike reported fiscal 2021 revenue of $44.5 billion with net income of $5.73 billion. These figures have been largely fueled by its digital business, which has more than doubled since 2019 (before the pandemic).
Despite being a well-established brand, Nike has grown its revenue by an average of 8.4% over the past five years. To maintain this growth, CEO John Donahoe plans to focus on its women’s business, apparel, Jordan brand and international markets. In particular, his women’s business will be a focus of his attention as it has grown outsized over the past few years.
He also said the company isn’t planning on just trying to gain market share from competitors. He wants to inspire more people to see themselves as athletes and increase the total size of the market.
Now, a quick look at the earnings forecast for Nike shares.
Nike stock earnings forecast
Nike is expected will report its results on September 23, 2021. Analysts expect EPS of $1.12 and total revenue of $12.46 billion. One interesting thing to note is that Nike has beaten its earnings per share (EPS) expectations for the past four consecutive quarters. Twice in the past four quarters, Nike has exceeded expectations by more than 80%.
However, COVID-19 still poses a significant risk to Nike’s business. Although the brunt of the pandemic has already passed in the United States, many other countries are still feeling the effects. This is important because it can disrupt Nike’s overseas supply lines and hurt its sales in those markets. Don’t forget that “international” is at the heart of CEO John Donahoes’ growth plan. Either of these scenarios would hurt Nike’s stock forecast in the near term.
Currently, it is predicted that Nike could lose up to 160 million pairs of shoes due to facility closures in Vietnam. While COVID-19 didn’t impact Nike’s business much in 2020, that doesn’t mean things could be any different this time around. Moreover, it is always difficult to say how investors will react to the news. For example, Nike might exceed expectations, but the stock might still fall.
Ultimately, pending a cultural shift in the minds of athletes, long-term forecasts for Nike stocks will almost always be bright. Nike’s brand, marketing and business fundamentals are incredibly strong. Even if Nike stock drops in the short term, it will likely only be a temporary setback.
I hope you found these Nike stock predictions helpful in determining if Nike is a good stock to buy! As usual, all investment decisions should be based on your own due diligence and risk tolerance.
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A graduate of the University of Miami, Teddy studied marketing and finance while playing four years on the football team. He has always had a passion for business and has used his experience from a few personal projects to become one of the top rated business writers on Fiverr.com. When he’s not pounding words on paper, you can find him pounding notes on the piano or traveling to a random location.