Wall Street has cheered Nike NKE stock since the market’s March lows. The sportswear powerhouse has soared 100% to double the S&P 500 over this stretch and come in just ahead of Lululemon LULU. The climb has come despite the fact that Nike’s overall sales have fallen in the last two quarters. So let’s quickly explore why NKE appears to be worth buying at the moment.
More Influential Than Ever…
Nike has managed to stay on top of a fickle industry for decades because of its ability to create trends and attach its brand to the biggest sports, athletes, and cultural icons in the world. Despite challenges from Lululemon and other newer players, as well as a resurgent Adidas ADDYY, it’s not hard to argue that Nike’s influence on sports and fashion has never been larger.
Nike’s shoes are hot commodities on all of the secondary sneaker sites and it has cemented its place in two of the world’s most popular sports: soccer and basketball. Plus, it’s the official sponsor of the NFL, which is the richest and most import league in the U.S.
The company also plays a key role in a world where consumers dress more relaxed than ever. All of this has helped Nike remain one of the world’s most valuable brands alongside the likes of McDonald’s MCD, Disney DIS, Apple AAPL and others.
NKE has been transitioning to a higher-margin, direct-to-consumer model for years as it saw the Amazon AMZN age coming. This includes multiple dedicated shopping apps and an insane reach across Instagram FB where consumers can now shop directly. More recently, Nike has beefed up and digitalized its supply chain.
Investors should also note that Nike has narrowed down its brick-and-mortar focus. This includes investing in its own stores in high-value cities and improving strategic partnerships with the likes of Foot Locker FL and others.
As we touched on at the outset, Nike’s Q4 FY20 sales fell 38%, as its stores were negatively impacted by coronavirus-based closures. NKE’s Q1 FY21 sales (reported on Sept. 22) then dipped only 1%. And Wall Street looked beyond the headline numbers to its booming e-commerce segment.
Nike’s digital sales soared 75% in Q4 FY20 and 82% last quarter. Peeking ahead, NKE is projected to return to top-line growth this quarter, with bigger gains expected after that. Zacks estimates call for the sports apparel giant’s adjusted fiscal 2021 earnings to soar 77% on 13% stronger revenue.
The company is then projected to follow up this growth with 30% stronger earnings in FY22 on 11% higher sales. This would mark an impressive return to growth after FY20’s sales dipped 4.4%. In fact, both revenue estimates would represent Nike’s best sales growth since fiscal 2012.
Nike’s strong longer-term earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now. NKE is also part of an industry that rests in the top 20% of our over 250 Zacks industries, and 19 of the 25 brokerage recommendations Zacks has for Nike come in at a “Strong Buy.” NKE stock currently sits near its recent records and its 0.77% dividend yield matches the 10-year U.S. Treasury heading into holiday shopping season.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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NIKE, Inc. (NKE) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
McDonalds Corporation (MCD) : Free Stock Analysis Report
The Walt Disney Company (DIS) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
Adidas AG (ADDYY) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
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