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Nike Is Expensive But Can Provide Substantial Income

Mar. 03, 2021 4:08 AM ETNIKE, Inc. (NKE)4 Comments
Geoff Considine profile picture
Geoff Considine


  • Nike stock is expensive (grade F for value from Seeking Alpha).
  • The stock price is 31% above its pre-COVID 2020 high.
  • Wall Street analysts are bullish.
  • The option-implied outlook is bearish.
  • A covered call strategy provides an attractive income level.

Nike (NYSE:NKE) has recently been ranked as the most valuable apparel brand in the world and the fortieth most valuable global brand across all industries. Given its enormous reach, it will not be surprising that Nike stock has had a stellar decade, with 20.73% annualized returns over the past ten years. NKE’s current stock price ($137.02) is 31% above its pre-COVID 2020 high of $104.53 (closing price on January 17, 2020). The stock is currently 6.8% below its 52-week high of $147.05 on January 11th, 2021.

Trailing total returns for NKE, the footwear sector, and the U.S. equity market (Source: Morningstar)

With TTM P/E of 78.6 and forward P/E of 46.3, the stock looks expensive (Seeking Alpha’s Factor Grade for value is an F). Certainly these types of P/Es are high for the market as a whole and are even high compared to major technology stocks. Apple’s (AAPL) forward P/E is 29.1, Alphabet’s (GOOG) (GOOGL) is 30.1, and Facebook’s (FB) is 23.8. On the other hand, Nike is a marketing machine like no other and has revolutionized the athletic footwear, accessories, and apparel industry. It is hard to predict what kinds of earnings growth are possible for this company. In addition, Nike is expanding into the digital space, so a valuation like a tech firm is perhaps not unreasonable.

Wall Street Analyst Outlook

Even at the current high valuation, the consensus of Wall Street analysts is bullish, with a consensus twelve-month price target of $163.52 (calculated from ranked analysts by eTrade). This price implies a gain of 19.3% over the next year. Even the lowest price target from amongst the analysts is slightly above the current price. In other words, not one of the thirty ranked analysts that eTrade surveyed thinks that the current price is too high.

Wall Street

This article was written by

Geoff Considine profile picture
Geoff has worked in quantitative finance for more than twenty years. Before entering finance, Geoff was a research scientist for NASA. Geoff holds a PhD in Atmospheric Science from the University of Colorado - Boulder and a BS in Physics from Georgia Tech. Neither Geoff Considine nor Quantext (Geoff's company) are investment advisors. Nothing in any commentary here on Seeking Alpha or elsewhere shall be regarded as advice.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in NKE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

If I go long NKE, I will also be selling a covered call as outlined here.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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