As long as shoppers are willing to pay a hefty premium for brand-name sneakers and other athletic wear, Nike (NKE) should continue to provide outstanding value for its stakeholders.
Granted, the COVID-19 pandemic put a damper on consumers’ enthusiasm for a while. Even today, the economy hasn’t fully recovered and the pre-pandemic, shop-till-you-drop ethos remains elusive.
Fear not, though, as the American consumer is surprisingly resilient even during the most challenging of market conditions. Indeed, recent fiscal data suggests that Nike’s loyal customer base is back up and running. (See Nike stock charts on TipRanks)
A Quick Look at NYSE: NKE Stock
NKE stock has been included in the Dow Jones index for so long that it’s hard to remember a time when it wasn’t part of that 30-company list. To remain in the Dow, a stock has to demonstrate consistent growth. Without a doubt, NKE stock fits that description.
After bottoming out at around $63 in March of 2020, Nike shares started on a run-up of epic proportions. By January of 2021, the stock price reached the $140’s.
For the next half-year, NKE stock took a breather and went sideways. That’s understandable – as the old saying goes, trees don’t grow straight to the heavens. Then, on June 25, Nike shares shot up 15% in a single day. There’s a very good reason for that.
By early July, NKE stock was hurtling towards $160. This is a true growth stock – and incidentally, it pays a forward annual dividend of 0.69%, which adds an extra incentive to buy and hold some shares in your portfolio.
Nike Stock Near-Doubled Revenues
Not long ago, Nike disclosed its results for the fiscal fourth quarter of 2021, as well as for the full year ending on May 31, 2021.
If you were worried that the American sportswear consumer has gone into hibernation, you can now put that fear to rest. For the fourth quarter, Nike reported revenues of $12.3 billion. That’s almost double (96% higher, to be exact) the year-ago quarter’s revenues.
The full year’s revenue improvement wasn’t quite as dramatic, but was impressive nonetheless. Specifically, Nike’s full-year reported revenues totaled $44.5 billion, for a 19% year-over-year increase.
What was particularly eye-catching, however, was what the execution of what President and CEO John Donahoe called Nike’s “Consumer Direct Acceleration strategy.” To quantify this, we can observe that NIKE Direct fourth-quarter sales rose 73% year-over-year, to $4.5 billion.
Moving Away from Wholesale
Don’t sleep on that last statistic – it’s an important one. That’s because NIKE Direct, which focuses on online sales, is quickly becoming an essential component of Nike’s business model. This makes sense at a time when the COVID-19 forced a shift towards e-commerce.
Indirectly but unmistakably, Nike Executive Vice President and Chief Financial Officer Matt Friend alluded to his company’s push towards digital sales, saying, “As we advance our consumer-led digital transformation, we are building a new financial model that will continue to fuel long-term sustainable, profitable growth for NIKE.”
Jefferies analyst Randal Konik seems to concur with this sentiment, and offered an eye-popping prediction.
Opining that Nike is “one of the best brands on the planet,” Konik observed that the company “is furthering its connection with its consumer through tech, and the company’s distribution model is moving away from wholesale.”
So again, e-commerce will likely be the key that unlocks further revenue growth for Nike. As for NKE stock, Konik boldly forecasted, “Shares should rise another 50% from here.”
Wall Street Weighs In
According to TipRanks’ analyst rating consensus, NKE is a Strong Buy, based on 19 Buy, 2 Hold, and 1 Sell rating. The average Nike price target is $182.19, implying 14.05% upside potential.
NKE Stock, The Takeaway
After NKE stock’s forceful rally, adding 50% might sound overly ambitious.
Yet, it’s actually not out of the question. Quarter after quarter, Nike remains in acceleration mode – and with solid execution on its e-commerce strategy, the sky is truly the limit.
Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
