Nike Stock Price Up 19% – Time to Buy NKE Stock?

Nike stock has been in an uptrend and hit a 52-week high of $159.97 on Friday. The stock is now up over 19% over the last month. Is it a good time to buy Nike (NKE) stock in July 2021?

Nike stock technical analysis

Nike stock is looking bullish on the charts. It is trading above the 30-day, 50-day, 100-day, and 200-day SMA (simple moving average) which indicates technical bullishness. However, the stock is looking overbought with a 14-day RSI (relative strength index) of 79.5. RSI values above 70 signal overbought positions while RSI valued below 30 signal oversold positions. However, overall NKE stock is looking bullish from a technical perspective.

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Recent developments

Last month, Nike released its fiscal fourth-quarter earnings that smashed analysts’ estimates. The company reported revenues of $12.34 billion which almost doubled year on year and surpassed analysts’ estimates of $11.01 billion. While the steep rise in revenues came from a lower base as the company’s performance was subdued in the corresponding quarter in 2020 due to COVID-19 restrictions, it was nonetheless a splendid performance.

The company’s sales in North America surged to a record high of $5.38 billion. However, the sales growth in Greater China was only about 17%. The slower sales growth came amid calls for boycotts in the world’s most populous country. Apart from Nike, several other US brands including rival Adidas have faced boycott threats in China over their previous comments on the Xinjiang region of China.

Nike faced boycott calls in China

Meanwhile, Nike management sounded upbeat on its outlook in China and said that the business has improved on a month-over-month basis. “Building on our 40-year history in Greater China, we continue to invest in serving consumers with the best products Nike has to offer in locally relevant ways,” said CFO Matt Friend during the earnings call.

NKE provided strong guidance

NKE posted an EPS of $0.93 in the fiscal fourth quarter which was higher than the $0.51 that analysts were expecting. The company’s guidance for the fiscal year 2022 was also encouraging and it said that it expects to post revenues above $50 billion in the year which was ahead of the $48.5 billion that analysts were expecting. After the company’s earnings beat and rosy guidance, several analysts upgraded Nike stock.

Analysts turn bullish on Nike stock

UBS reiterated its bullish bets on Nike stock and said it expects it to rise further. “Nike’s 42c 4Q21 EPS beat and well-above consensus FY22 guide demonstrated the company can still deliver big earnings growth despite near-term China challenges. The market’s main question now is if this is “the top” for Nike? We think the answer is no,” said UBS analysts in their note.

Stifel analyst Jim Duffy raised Nike’s target price to $213. Cowen also raised NKE’s target price to $181. “Management’s confidence is hitting an inflection and Q4 results indicate the digitally driven acceleration in the financial model,” said analyst John Kernan. He said that he expects the company’s market cap to surpass $300 billion in the future. Currently, the sports goods company commands a market cap of around $250 billion. Morgan Stanley also raised Nike’s target price to a street high of $214.

NKE stock forecast

Of the 29 analysts covering NKE stock, 25 rates them as a buy or some equivalent while three analysts have a hold rating. One analyst has a sell rating on the stock. Its median target price of $179.50 is a premium of 12.4% above current prices. The stock’s lowest target price of $157 is a discount of 1.7% while its highest target price of $214 implies an upside of 34% over current prices.

NKE stock valuation concerns

Meanwhile, some analysts have been apprehensive about Nike’s valuation. The stock trades at an NTM (next-12 months) PE multiple of 37.1x which is higher than the 3-year and 5-year average of 34x and 30x respectively.

Credit Suisse believes that the valuation concerns are unwarranted. “The company is emerging from the Covid period into the biggest [profit and loss] evolutions in our coverage universe,” said Credit Suisse analyst Michael Binetti. He added that Nike deserves “a significant valuation premium” over peers.

Nike stock looks like a good buy

Nike has been transforming its business to a DTC (direct to consumer) model and is pivoting towards online sales from the wholesale model. The transformation will help the company reach a bigger audience and also help support its margins in the medium to long term. While there could be concerns over the valuations and a slowdown in growth, most of these look unfounded. Given the company’s transformation and its strong brand appeal, Nike stock looks like a good buy at these prices.

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