Nike (NKE)
Shares of NKE are now down over 66% in the past 5 years thanks to lowered guidance and turnaround issues, and we think this is the perfect opportunity for investors to start picking up shares. While lowered guidance and a slow general turnaround are certainly real issues, we think the market has looked past their brand equity, overall earnings forecasts, and their dividend and have severely oversold the stock.
| NIKE | |
| Share Price | $44.19 |
| Earnings Per Share | $1.52 |
| EPS (Forward 1yr) | $2.10 |
| Price to Earnings | 29.1 |
| EPS Growth (Projected) | 38.2% |
| PEG | 0.8 |
| Forecasted Price (1 yr) | $61.05 |
Yes, their PE of 29 is extremely high for an apparel company who’s growth in China has clearly hit a wall; but this exact same scenario happened in 2016 and saw their stock collapse 19%, only to rebound +200% 3 years later. Their weakened earnings outlook is a concern for sure, but lets not forget it’s still projected to do quite well in the next couple years and they have been consistently beating their earnings – meaning there is still a decent chance they can turn the ship around and keep that valuation high.
So between it’s latest 4 earnings beats, 10 years of consistent dividend increases, and 0.8 PEG ratio I think NKE has finally come down to a point where investors can start to cost average and look into picking up shares. Keep in mind that NKE has a current Beta of 1.3 and this stock is going to continue to see massive volatility through the next few years, so investors will have to be patient in the near term. However, we think those that start to accumulate shares now and continue to cost average over the next couple years will be greatly rewarded given the current state of the share price.
Despite the latest Nike stock crash we have put it as a medium risk, high reward stock and maintain a Strong Buy rating with a +41% one year forecast. The average analyst rating for NKE right now is also a Buy with a +40% one year forecast.
