Nike is one of the year’s best performers in the Dow Jones Industrial Average.
Stephanie Keith/Getty ImagesWith the year almost over, we’re taking a look at all 30 stocks in the Dow Jones Industrial Average, starting with the worst performers— Boeing and Walgreens Boots Alliance —and working our way up to the highest-flying stock in the benchmark— Apple. The ranking may shift before the close of 2020 trading, but the stories behind the stocks shouldn’t.
Nike shares have rallied during the Covid-19 pandemic. But that sets the bar high for its financial performance next year.
The athletic-clothing brand (ticker: NKE) has gained 40% in 2020, making it the third-best performer in the Dow as of Dec. 30.
While apparel and accessory retailers took a hit with the onset of Covid—Americans stayed home more often, so new wardrobe items became less important—athletic apparel bucked this trend. The pandemic refocused many people on health and exercise, and others just wanted comfortable-yet-fashionable athleisure gear to wear around the house. Both kinds of consumer benefitted Nike.
The company did suffer from Covid-related weakness amid store closures. The pain didn’t last long, however. Nike’s financial recovery was helped by its brand cachet, along with moves it was making before the pandemic: investing heavily in its direct-to-consumer omnichannel platform, and cutting ties with some third-party partners.
Looking ahead, expectations will likely be high. Nike has repeatedly notched new record highs in 2020, and investors will want to see earnings continue to grow, especially with a valuation above 40 times next year’s forecasts for earnings. And as the economy reopens, consumers may return to spending part of their budgets on office and dressier clothing, which could be a headwind for Nike’s sales.
That said, bulls argue that there are plenty of reasons the stock could keep rallying, such as its ongoing shift to online sales, a recovery in its higher-margin business in China, and product innovation.
To say that Wall Street is enthusiastic about the stock is an understatement: A full 86% of the 35 analysts tracked by FactSet have a Buy rating or the equivalent on Nike. The average analyst price target is $161 per share, implying gains of almost 14% from where it closed Dec. 30 at $141.58. And there seems to be just one Nike bear left on Wall Street.
Yet Nike just this month reported a blowout quarter, so it could be difficult to find a near-term catalyst to drive the stock higher—unless it provides an upbeat update about holiday sales.
Write to Teresa Rivas at teresa.rivas@barrons.com
January 02, 2021 at 04:30PM
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Nike Stock Soared During Covid. So Did Investors’ Expectations. - Barron's
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