Nike Inc (NKE) — This leading designer and marketer of high-quality athletic footwear, apparel and accessories shows consistent growth — the result of product recognition executed through a solid corporate marketing strategy.
Sales increased 10% in fiscal 2015, ended in May, and analysts project 6% revenue growth in fiscal 2016. Capital IQ said it expects strong growth in the company’s core wholesale and direct-to-consumer sales, as well as continued gains in key categories including basketball, running and football. At the end of May, management said worldwide future orders were up 2%.
Capital IQ estimates operating margins will expand to 14.1% in fiscal 2016, up from 13.8% in FY 2015. While currency fluctuations, store opening costs and labor cost inflation are expected to weigh on margins, this should be more than offset by higher pricing and lower raw materials costs.
Capital IQ analysts forecast FY 2016 earnings will increase 7% to $3.96 per share and another 16% in FY 2017 to $4.60. They rate NKE stock a “buy” with a 12-month target of $120.
NKE stock has traded in a well-defined bull channel since shares broke out from the low $80s in September 2014. Currently, the channel’s support is at about $106, with the 200-day moving average below at $102.13. Channel resistance is near $120.
MACD flashed a new buy signal last week, which is supported by a larger number of buyers than sellers, a pattern that can be seen on the chart going back to July 2014.
Along with many other high-quality stocks, Nike’s support was briefly broken during the recent high-volume sell-off. However, it quickly regained its bull channel, evidence that large buyers are still in the wings.
My buy under price for NKE stock is $106 with a three-month trading objective of $125, which would result in a short-term gain of 18%.
