Over the past five years, Nike (NYSE:NKE) has more than doubled its stock price. And year-over-year, shares of Nike stock have gained 21%.
Furthermore, while the run is far from over, some investors are hesitant to touch the stock on excessive coronavirus fears. All after the company said it could have a “material impact” on its China operations.
However, I strongly believe most of the fear is now priced in the stock — creating a “blood in the streets” opportunity on excessive pessimism. Analysts are just as bullish, and I still believe “NKE could be a $120 stock by the middle of 2020,” as I noted just weeks ago.
Analysts Are Just As Bullish on Nike Stock
Granted, there are no certainties with the coronavirus. We have to expect further volatility, as more cases and deaths are reported. However, any drops should be viewed as an “enhanced buying opportunity,” as Citigroup’s Paul Lejuez referred to it as.
“We view this as a temporary headwind and not indicative of overall health of the brand in China, which remains NKE’s most compelling long-term growth opportunity,” Lejuez said. He added that while the coronavirus outbreak could force total third-quarter sales growth from 9.6% to 7.7%, the firm still maintains a “buy” rating with a price target of $115.
Additionally, there was plenty of optimism for Nike stock at UBS, where the firm has a “buy” rating. While analysts Jay Sole and Megan Foo do expect to see a drop in Q3 sales, they say that “Nike’s business model changes and investments in product innovation, supply chain, and e-commerce likely make the company worth much more long-term.” In turn, Sole raised his rating from “Neutral” to “Buy” and increased his target price to $136 from $103.
Uptrend Hasn’t Lost Its Spring
There are no clear signs that Nike stock will lose momentum. Especially with solid earnings and dividend growth, and incredible innovation. The company just declared a quarterly dividend of $0.245 per share, payable April 1, 2020 to shareholders of record as of March 2, 2020. Nike also posted a strong quarterly report, with earnings per share (EPS) of 70 cents on sales of $10.3 billion. Both numbers crushed estimates, which called for an EPS of 58 cents on sales of about $10.1 billion.
“In Q2, 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,” chairman, president and CEO of Nike 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.”
Technically, It Pays to Buy the Pullbacks
“Nike has been one of those charts where it has historically paid to buy pullbacks, especially within the longer context of the uptrend that’s taking place. One way to find out whether a pullback is buyable is looking at the RSI indicator,” MKM Partners’ JC O’Hara says.
And he’s right. If you take a look at a three-year chart of Nike stock, it’s clear as day.
Every time RSI dips to or below its 30-line, Nike stock tends to pivot higher shortly after. However, we never want to rely on a single indicator to determine if a stock is a buy. We can also look for massive dips in Moving Average Convergence Divergence (MACD), and dips to the 80-line on the Williams’ Percentage Range as well. In fact, when each of these indicators aligns in oversold territory, shares of Nike stock has historically pivoted higher shortly after.
The Bottom Line on Nike Stock
Overall, NKE stock has been unfairly pummeled on coronavirus fears.
However, with much of the fear now firmly priced in, I strongly believe Nike stock could run to $120. Plus, Nike remains a top leader in sports apparel.
So with consumer spending only likely to grow, I believe Nike’s uptrend could remain intact for years to come.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.