Nike (NKE) was trading at $147 in January. The stock has since dipped down to $132. However, it remains higher on a longer timeframe.
Those who have been patiently waiting on the sidelines for NKE to slide have an attractive buying opportunity at the current moment. NKE could easily pop in the weeks ahead, moving back to the $150 level in anticipation of strong sales from the reopening of the economy, the return to school, and a spike in consumer spending. Nike’s sales have been negatively impacted by the drop in foot traffic at retailers.
Where does NKE go from here? Will the stock break through its 52-week high or drop to the $120s or even lower? Let’s find out what the future has in store for this footwear powerhouse.
NKE Points of Note
Based in Beaverton, Oregon, NKE has been in business dating all the way back to the late 60s. NKE’s footwear is certainly quite popular yet the company also sells accessories, clothing, equipment, and services. All in all, NKE has operations in more than 160 countries.
NKE has a forward P/E ratio of 42.17. This is a fairly high forward P/E ratio, especially for a company that sells sneakers and garments as opposed to high-tech solutions. However, the elevated forward P/E ratio is partially the result of NKE’s stock trading about $15 away from its 52-week high of $147.95. The stock’s 52-week low is $84.11.
The retail boom taking place this spring will undoubtedly buoy NKE. Though NKE endured a sales slump in the winter, it has the potential to bounce back as life gradually returns to normal, and consumer confidence and ensuing spending increase in unison. NKE revenue dropped about 1% through the winter, reversing course from the 7% pop in the previous quarter. NKE’s brass quickly made it quite clear the declining sales are unrelated to demand, which remains strong. Rather, NKE had some problems with shipping tied to the ongoing pandemic. Thankfully, NKE executives are adamant these shipping issues will be overcome in the weeks ahead. Climbing prices and growing e-sales with comparably fat margins are boosting NKE profitability all the more.
It is particularly interesting to note NKE recently announced it is revealing refurbished sneakers and athletic footwear that have been cleaned up and put back on the market at a lower price. This strategy to bolster sales seems questionable at best. The Nike Refurbished sneaker line will initially launch at slightly more than a dozen locations throughout the United States. However, it should come as no surprise if the program falters as most consumers are uninterested in wearing smelly, stained, and scuffed sneakers worn by others.
The Analysts’ Take on NKE
The analysts are in love with NKE, establishing an average target price of $164.62 for the stock. The analysts’ high 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 views the stock as a Strong Sell.
NKE POWR Ratings
NKE has a B overall POWR Rating grade meaning it is a Buy. The stock has Bs in the Momentum, Quality, Sentiment, and Growth components. Click here to learn more about how NKE grades out in the Value and Stability components.
Of the 33 publicly traded companies in the Athletics & Recreation space, NKE is ranked 19th. As a whole, the Athletics & Recreation category has an A grade. You can learn more about the stocks in this segment by clicking here.
Is NKE a Smart Investment?
Indeed, NKE is a smart investment. NKE has a powerful brand and pricing power. It was able to use the pandemic to grow its digital sales and was able to offset a large portion of the drop in retail sales. Now, retail sales are about to explode, while its digital sales channel will drive the company’s future growth.
Add in the fact that NKE grades out well in the POWR Ratings and there is even more reason to buy this stock. Investors should feel perfectly comfortable loading up on NKE stock as we approach the final months of spring and the start of summer.
NKE shares were trading at $130.76 per share on Wednesday morning, down $1.35 (-1.02%). Year-to-date, NKE has declined -7.38%, versus a 12.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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