Up 30% in the past year, global apparel giant Nike (NYSE:NKE) hasn’t lost its step.
The best part — it’s still a strong buy. Not only are we seeing plenty of momentum in Nike stock, analysts love it. Goldman Sachs’ Alexandra Walvis upgraded the stock to a “buy” rating, citing “evidence of building pricing power, signs of operating leverage, accelerating shift to differentiated retail, sharply scaling app ecosystem, and a constructive global athletic growth backdrop.”
Even Raymond James analyst Matthew McClintock noted innovation will soon drive “exceptional revenue growth going forward,” raising his price target from $100 to $110 a share.
With a strong uptrend still in place, coupled with strong earnings and innovation, I’d believe NKE could be a $120 stock by the middle of 2020.
Nike Stock Has Plenty of Spring in its Step
In short, NKE is an explosive stock, and there are no clear signs it’ll lose momentum.
In Dec. 2019, Nike blew earnings out of the water with earnings-per-share of 71 cents on sales of $10.3 billion. Both numbers crushed estimates calling for an EPS of 58 cents on sales of $10.1 billion.
“NIKE has proven again that innovation is our greatest competitive edge —turning athlete insights into breakthrough product and digital services, as we offer more choice to more consumers at an accelerated pace,” CEO Mark Parker said. “Our entire NIKE team is fueling our current momentum, and I’ve never been more optimistic about the future of this company.”
Better yet, gross margins expanded again as well, increasing 20 basis points to 44%. Also, during the second quarter Nike bought back 10.1 million shares for about $922 million, as part of a four-year $15 billion program.
“Nike projects as a 7%-10% revenue grower over the next few years, with upside margin and buyback drivers that should spark 15%-plus profit growth. Assuming so, my modeling pegs Nike’s 2026 earnings per share target at $7.50,” noted InvestorPlace contributor Luke Lango.
Growth in Sports Apparel Bullish for NKE
Sports apparel is still robust, with no clear signs of cooling either.
Allied Market Research for example notes the global sports apparel market could grow to $248.1 billion by 2026 from $167.7 billion in 2018. This is mostly thanks to rising awareness and adoption of health programs, such as aerobics and yoga, among consumers.
Statista estimates the global sports apparel market could balloon to $207.79 billion over the next five years from $135 billion in 2012. With Nike a leader in the space, the stock should continue to appreciate higher as consumers flock to its products.
With considerable demand and innovation, I wouldn’t be shocked if Nike stock were to double again.
The Bottom Line on Nike Stock
Nike remains a top leader in sports apparel and continues to outperform. With consumer spending on Nike’s sports apparel only likely to grow, I believe NKE could be a $120 stock by mid-2020. Nike stock continues to be a solid long-term opportunity with a strong dividend to boot.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.