Nike Inc (NYSE:NKE) stock is widely considered a blue-chip name and it’s not hard to see why.
The company is the world’s premier athletic footwear and sporting apparel company. Show anyone the company’s signature “swoosh” logo, and they’ll know the name of the company behind it.
NKE stock is up about 28% over the past year, but the company has a few catalysts that could send Nike stock higher.
If you believe in a quality business with lots of growth ahead, then Nike might be a company worth taking a closer look at. Here’s why…
For a company that has a market cap of $105 billion, it’s hard to imagine there is much more room for growth. But despite its already massive size, CEO Mark Parker insists the company is “built for growth.” (Source: “Nike just promised to reach $50 billion in sales by 2020,” Fortune, October 14, 2015.)
Parker also announced the company is targeting about $50.0 billion in sales by 2020. (Source: Ibid.) That’s about a 10% compounded annual growth rate. Nike sales in 2015 were $30.6 billion, so it has a ways to go, but the company is confident it can reach it.
How will it achieve that growth?
Nike expects its e-commerce business to grow to more than $7.0 billion in the next five years, which is up drastically from today, being around $1.0 billion. (Source: Ibid.)
Nike also expects its “Jordan” brand products’ sales to double to $4.5 billion by 2020, and its women’s apparel business to more than double to about $11.0 billion. (Source: Ibid.)
Starting in the 2017 season, Nike will be the official outfitter of the NBA and WNBA. This is huge for Nike, as the company will be able to supply all team uniforms and warm-up gear, as well as stamp its logo on team jerseys.
The NBA has wide exposure and will cement and even continue to build Nike’s brand, which is already considered the strongest in athletics.
The deal is for eight years and it’s worth more than $1.0 billion, which gives Nike a tight grip on the sport in which it controls more than 90% of the basketball footwear market. (Source: “Nike Wins Deal to Outfit NBA,” The Wall Street Journal, June 10, 2015.)
Nike also has sponsorships in youth basketball leagues, college teams, and marquee players, such as LeBron James.
The deal may sound like a lot of money for Nike to spend, but Nike will certainly make that back and more when millions of fans around the world purchase their favorite team jerseys and other Nike NBA gear.
Also, NKE stock has had a licensing agreement with the NFL since 2012 to be the supplier of NFL jerseys. The deal is for five years and will likely be extended. (Source: “Should You Buy Nike Stock? Just Do It,” InvestorPlace, June 16, 2015.)
Nike isn’t usually a name that comes up when dividend investors are looking for a stock to park their money and generate some income, but NKE stock is a solid dividend play.
NKE stock is currently yielding 1.02%. For the last five years, the company has been increasing its dividend about 16% a year on average. Nike has hiked its dividend payout every year for the last 14 years.
On top of that, Nike recently approved a $12.0-billion share repurchase program, which will reduce the stock float a bit and increase the value of investors’ shares.
The Bottom Line on NKE Stock
As one of the most recognized brands in the world, NKE stock might deserve a closer look for any investor’s portfolio. Now may be right time for you to add Nike to your watch list.