Nike (NKE) stock forecast: can it still just do it?
As more people switch to healthier lifestyles, the demand for sportswear and accessories has risen steadily in recent decades. Nike (NKE), one of the world’s most recognised brands, has grown along with it, dominating the athletic and sports apparel industry for years.
Founded in 1964 as Blue Ribbons Sports, the company launched a line of Nike trainers – named after the Greek goddess of victory – in 1972. Six years later, in 1978, the firm restyled itself as Nike Inc. The company’s famous Swoosh logo was designed to convey motion and, along with the firm’s ‘Just Do It’ slogan, helped establish the Nike brand in the public’s mind.
While running shoes have been Nike’s staple offering since the start, it also manufactures and markets sportswear and equipment. Its owned subsidiaries include popular brands, such as Converse and Jordan.
Nike took the 13th position in Forbe’s 2020 World’s Most Valuable Brands list. It was the only sportswear brand in the top 50; Adidas (ADS) came in at number 51.
When the Covid pandemic struck in 2020, the Nike stock value fell steeply. On 14 February 2020, it was worth $103.54 (£79.45) per share. By 16 March, the price was down to $66.79 per share. The stock has recovered steadily since then, and, at the time of writing on 22 February 2022, its last closing price was $142.95.
Business isn’t quite back to normal, however. In its 2022 second-quarter financial earnings report, Nike admitted that it still faces ongoing challenges in its supply chain with resulting inventory constraints. With global economies slowly opening up after the pandemic, what does the future hold for the sportswear giant? Join us as we undertake a fundamental analysis, catch up on the latest news and get analyst insights on Nike's share price forecast.
Fundamental analysis
The second-quarter results were published on 20 December 2021 and covered the three months that ended on 30 November 2021. Nike reported overall revenues of $11.36bn for the quarter, up by 1% from the $11.24bn revenues reported in the same year-ago period. However, on currency-neutral grounds, the top-line growth was flat compared to the previous year. This slow pace of change was primarily attributed to the lower inventory levels due to Covid-19-related factory closures in Greater China as well as the Asia Pacific and Latin America (APLA) markets.
According to the company’s balance sheet, inventories stood at $6.51bn for the quarter ending 30 November 2021, reflecting the supply chain and logistical challenges the company faced over the period. The in-transit inventories were up by nearly 7% compared the previous year’s inventory level of $6.09bn.
In the Greater China region, earnings before interest and taxes (EBIT) have fallen by nearly 36% from the previous year’s second quarter. Back then, the EBIT figure was reported as $891m, $322m higher than the $569m posted in the latest results. Additionally, in the APLA region, earnings were reported at $388m, representing an 8.5% drop compared to the previous year’s second-quarter earnings of $424m.
Relatively strong earnings were turned in elsewhere, however, offsetting some of the losses in the China and APLA territories. North America, along with Europe, the Middle East and Africa (EMEA), performed well, garnering combined earnings of $2.04bn, for a year-on-year growth percentage of over 21%. The previous figure was $1.68bn.
The highest revenue growth was seen in North America equipment sales, with $145m of sales in the second quarter of 2022, compared to $126m in the same year-ago period, an increase of 15%.
The most significant revenue dip came in Greater China’s footwear sales. For the quarter ending 30 November 2021, Nike reported footwear revenue as $1.24bn, 21% lower than the previous year’s sales of $1.57bn for the same quarter.
Nike has a continuous 20-year history of paying increasing dividends to its shareholders. This tradition continued in the second quarter of 2022, with the company paying dividends of $437m, 14% higher than the previous year. Additionally, it repurchased shares worth $968m over the quarter.
Nike stock news and movements
Touted as the “largest-ever capital raise for women’s sports property”, the Women’s National Basketball Association (WNBA) recently raised a ground-breaking sum – reported by ESPN to be $75m – from a group of equity investors, with Nike spearheading the initiative.
In a press release issued on 3 February 2022, Nike confirmed its equity investment for the WNBA’s welfare, honouring its 25-year commitment to the association. Nike stated that the partnership would help “create more visibility for WNBA athletes” and support the overall development of a new generation of female basketball players.
Sonja Henning, vice president, NA Leagues Partnerships at Nike, said:
Nike’s historical stock price has experienced pandemic-induced volatility in the last two years, with the global lockdowns adversely impacting its sales and the stock dipping to the lows of $66.79 on 16 March 2020. In 2021, however, it bounced back strongly while juggling the global supply chain issues.
The Nike stock closed the year at $166.67 on 31 December 2021, showcasing annual growth of just over 18%, from its 4 January 2021 close price of $140.10. At the time of writing on 22 February 2022, Nike’s stock closed the day at $142.95. From its 3 January 2022 close price of $164.67, the stock has fallen by 13.19%.
NKE future price forecasts and analyst insights
Sharing a technical analysis on the Nike stock market, Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory Services, said:
According to the algorithmic forecaster Wallet Investor on 22 February 2022, the Nike stock price target could be trading in the range of $291.989 to $292.58 by February 2027. Its Nike stock predictions were $169.65 for December 2022 and $261.65 for December 2025.
Data compiled by Tip Ranks showed that out of 22 analysts, 18 rated the NKE stock as a buy, while the remaining four suggested holding on to stock. Their 12-month consensus Nike stock price target was $183.81 per share. The lowest NKE stock forecast price was $125, and the highest was $202. The 12-month consensus price target predicted more than a 28% increase compared to the 22 February 2022 closing price of $142.95.
On 21 February 2022, Market Screener reported that Williams Trading downgraded Nike’s stock rating to a hold from a buy. It also adjusted the price target, reducing it by 13% to $125. On the other hand, Wells Fargo upgraded Nike to overweight from equal weight and set its price target at $175 on 25 January 2022.
When looking at Nike stock projections, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ Nike stock analysis is based on making fundamental and technical studies of the stock’s performance, but past performance is no guarantee of future results. Never invest more than you can afford to lose.
FAQs
Is Nike stock a buy?
Nike’s stock has suffered some headwinds due to global supply challenges in the past few months. Through its Nike Direct business, it hopes to regain ground by selling directly to the customers, eliminating the middlemen. Its second-quarter financial results for the 2022 financial year reported growth of 8% in its Nike Direct business.
Whether Nike stock is a suitable investment for you depends on your investment objectives. You should conduct your own research and then make a decision regarding Nike stock buy, sell or hold. It’s essential to reach your own conclusion on a company’s prospects and the likelihood of it achieving analysts’ targets.
Does Nike stock pay dividends?
Nike has a 20-year history of paying increasing dividends, but that’s no guarantee that this practice will continue. In the second quarter of the 2022 financial year, the company paid $437m in dividends.
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