NKE stock forecast: Just do it?

• Updated

The Nike stock forecast is optimistic for 2022, after strong US sales saved 2021

Ciontents

The sportswear and footwear giant Nike showed it is on a better footing when it released its second-quarter results in December 2021, despite Covid-induced problems hurting its supply chain and threatening sales for the 2021 holiday season.

When it issued its previous quarterly report in August 2021, the future looked fuzzy for the sports company. The company had been outperforming expectations. That was then, though, and things dampened the Nike stock forecast somewhat.

Supply issues

The company’s supply chain has been problematic since mid-2021 because many of the Vietnamese factories where Nike makes its goods either closed or were hit by labour shortages due to a surge in the Covid-19 Delta variant.

During the second-quarter results call, analysts heard an update on the factory reopening plan. Nearly all affected factories in Vietnam had begun to reopen in October. As of 20 December, all factories were operational and employee attendance rates had improved. The biggest source of optimism? Weekly footwear and apparel production had reached 80% of pre-closure volumes.

Adding a dose of reality, however, Nike management said it would take until fiscal 2023 to be back to normal. For now, the three lost months cancelled production of 130 million units.

Nike trainers
Nike trainers in a shop in Milan, Italy - Photo: Shutterstock

Quarterly earnings report

Nike’s second-quarter earnings report, which came out on 20 December, was mixed news for the Nike stock forecast. Revenue grew by only 1% on a year-on-year basis to $11.4bn, as the company continued to manage supply chain challenges.

Greater China and Asia Pacific/Latin America declined, due to tight inventories from pandemic-related factory closures. North America and Europe/Middle East/Africa showed growth due to better inventory entering the second quarter.

Net income grew 7% to $1.3bn, with diluted earnings per share of $0.83. That’s a nickel better than the same time a year ago and $1.98 per share on a half-year basis.

The comparatively slow growth in revenue over the three months ending on 30 November was partly blamed on underperformance in the Greater China region. The quarter saw sales decline by 20% in the region, which has traditionally been one of the most profitable global regions for Nike. CEO John Donohoe, however, was unfazed.

“Nike always has and we always will take a long term view of China – we’ve been there 40 years,” Donohoe said. “We’ve built up a very strong strong brand connection with the consumer in China and we’re going to continue to lead and invest in China”.

In contrast, the swoosh logo company saw sales growth of 12% in North America, where revenue beat estimates by $300m, coming in at $4.48bn.

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CFO Matt Friend pointed to a strong Black Friday-to-Christmas shopping season that set the stage for healthy demand early in the third quarter, “with season-to-date holiday retail sales across the total market growing [by] double digits, energised by the continued momentum from the return to sport and the beginning of an outstanding holiday season.”

Cause for concern

Donohoe referred to “structural tailwinds” that favour the company: these tailwinds, he said, include a larger movement for health and fitness, consumers’ desire to wear athletic apparel and footwear all the time, and the ever-expanding definition of sport. The company, he said, is in a stronger competitive position than it was 18 months ago.

“Challenges create opportunities for the strong brands to get stronger, and that’s what’s happening here,” Donohoe said.

Markets respond

When the markets closed on 20 December, the Nike stock price of $156.98 showed a 2.7% drop from the previous week’s close. It was also $20 lower than the 52-week high of $177.51 achieved on 5 November.

To put that into context, at close of business on 24 June – before the previous quarter’s results were released – the Nike share price stood at $133.60. By 25 June it had rocketed up to $154.35. Over the next three months, the lowest it fell to was $150.48 intraday on 25 June, and it had even reached a quarterly high of $174.36 when the markets opened on 6 August.

Nike share price chart
Nike share price chart - Credit: Currency.com

Nike stock forecast

When it comes to an actual Nike share price forecast, however, experts seem pretty optimistic.

CNN Money surveyed 28 analysts for their Nike stock forecast for 2022, and the median prediction was $184.50, up 17.4% from its closing price on 20 December. The most optimistic analyst saw Nike standing at $206 in 12 months’ time, while the most pessimistic saw a fall  to $154.

Coming back to today, CNN Money also asked 31 analysts for their recommendations. Of those, 21 said people should buy Nike. Three said it would outperform expectations, five said people should hold their Nike stock, and two said it would underperform expectations. The biggest takeaway? Not one suggested selling.

Of course, it’s always worth bearing in mind that analysts don’t always get things right, and that past results are no guarantee of future performance.

FAQs

It still might be, but there are caveats. While the experts’ 12-month forecasts are mainly optimistic, the company admits that its supply chain issues aren’t yet resolved.

If you want to invest in the company, remember that prices can go down as well as up. You should do your own research, and you should never invest more money than you can afford to lose. Always remember your decision to trade depends on your attitude to risk, your expertise in this market and the spread of your investment portfolio. The information in this article is not intended as investment advice.

Yes, it does. According to the company, investors were due to receive $0.305 per share in December 2021.

Most analysts think it will, but do consider the challenges being faced by the company with regards to supply. You need to do your own research before committing to investing.

You can trade Nike shares as tokenised assets at Currency.com today. Tokenised assets are crypto derivatives whose value is linked to the value of a particular asset.

Currency.com offers the opportunity to buy with leverage, with easily defined stop losses, and limits to close positions at a specified price. But remember: while leverage will allow you to make bigger profits if a stock goes up, it will also magnify your losses if the price goes down.

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