Nike Inc: Will the HyperAdapt 1.0 Put It on the $50B Path? (NKE)

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It’s 2016, folks. And in 2016, we’re not too fond of doing things ourselves — it’d be preferable if someone else did them — hence why Google (GOOG, GOOGL), Tesla (TSLA), Baidu (BIDU) and Uber all are working on self-driving cars.

NKE: Will the HyperAdapt 1.0 Put It on the $50B Path?Nike Inc (NKE), for its part, is working on a self-lacing shoe. What that says about our society I’m afraid to explore, but what that says about the future of NKE stock — that’s worth delving into.

Nike’s Shift Into Consumer Tech

Since its destiny-shaping signing of Michael Jordan in the 1980s, Nike has been one of the iconic American brands, and you can catch a glimpse of its ubiquitous logo on a daily basis — just go to a public place and look down. With March Madness upon us, the television should also provide ample opportunity.

Getting to that level took decades and billions of dollars in marketing spend, but it has enriched investors along the way. Since going public in 1980, NKE stock has returned 36,636% to date. A $1,000 investment on the first day of trading would be worth upward of $367,000 today.

Not bad.

But now that Nike is mature, the issue for NKE investors is finding new outlets for growth. Increasingly, that means infusing technology into its products, something that up-and-coming rival Under Armour (UA) is very keen on. After spending $710 million on a trio of tech companies in hopes of building out its fitness tracking hardware and software, that may be an understatement.

NKE’s own future in fitness tracking is less certain after shutting down its FuelBand line in 2014, but this year it’ll be showing off its tech know-how when it unveils its first mass-produced self-lacing shoe, the HyperAdapt 1.0.

Some readers may recognize the concept from 1989’s classic sci-fi/comedy flick, “Back to the Future Part II”, where Marty McFly travels to the year 2015 and discovers a high-tech world filled with sweet products including hoverboards and self-lacing shoes.

Last year, to the great joy and jealousy of sneakerheads everywhere, Nike made that future a reality with a limited-edition, 1500-pair release of the Nike Mag. What’s planned for this year could actually be a needle-mover for NKE stock.

That’s because, while the Nike Mag was meant more for branding and to generate excitement, the HyperAdapt 1.0 will be a mass-release. The pricing details are still up in the air, but I’d be surprised to see NKE price them below the high-$100s, low-$200s range.

More importantly. though, is where the HyperAdapt 1.0 fits into Nike’s long-term strategy. The company set a lofty goal for itself last year, telling NKE investors that it aimed to hit $50 billion in annual revenue by 2020 — roughly a 60% increase from the $30.7 billion it hauled in last year.

A key element in executing on that goal will be increasing direct-to-consumer sales, which are substantially more profitable for Nike than sales made through third-party retail outlets like Foot Locker (FL) and Finish Line (FINL).

To that end, Nike — like rival Under Armour — is focusing on beefing up its app game. When the HyperAdapt first goes on sale, it will be available exclusively through the Nike+ app, letting Nike cut out the middle man and keep a far larger sum for itself.

How the HyperAdapt will be received remains to be seen, and I’ll admit that despite geeking out myself to last year’s Air Mags, I’m almost positive that as a consumer, self-lacing tech simply isn’t worth the premium likely to be slapped on the price tag.

From an investor standpoint, I love and hate that Nike is setting high goals for itself. You want to have an ambitious vision, but you also don’t want to set yourself up for failure.

That said, I think the release later this year — and the exclusive utilization of the app in the early days of selling — are genuine and well-thought-out steps that could very well end up with $50 billion in revenue by 2020.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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