Nike could go to $100 in 2025

Nike (NYSE:NKE) is in an extremely difficult phase of its company history. The company has struggled with weak demand trends and recently announced a major leadership change.

Therefore, it is no wonder that this top Consumer discretionary stocks is down 13% over the last 12 months. This was at a time when this was happening S&P 500 generate a total return of 35%.

But I believe Nike stock could rise 20% in a year and reach $100. Here are three reasons why.

The return of Elliott Hill

John Donahoe has been CEO of Nike since January 2020. He helped the company navigate the COVID-19 pandemic, supply chain issues, inflationary pressures and rising interest rates. However, under his leadership, Nike shares plummeted. Shareholders would agree it’s time for a change.

Elliott Hill, a longtime veteran of the sportswear giant who retired in 2020, starts his new job as CEO on October 14th. And his top priority must be making Nike a beacon of product innovation. Additionally, Hill must reverse Donahoe’s previous stance of cutting ties with wholesale partners.

The arrival of a new CEO certainly brings an additional element of uncertainty for shareholders. It also doesn’t help that Nike has decided not to provide financial guidance for the current fiscal year and that the company is postponing its investor day, originally scheduled for November.

However, Hill worked at Nike for 32 years, starting as an intern and rising to president of the consumer and markets division by the time he retired. There is perhaps no one who knows this business better at a fundamental level from all angles than him. And his new perspective may be exactly what the struggling company needs right now, especially when it comes to identifying core problems and providing effective solutions to them. Investors have every reason to be optimistic that he can turn things around.

Better macro background

The economic situation is another reason to believe that Nike stock can rise to $100 in 2025. The Federal Reserve believes it finally has inflation under control, which was the impetus for the central bank’s move reduce the key interest rate For the first time in more than four years. This could be the beginning of a sustainably accommodative monetary policy.

All other things being equal, lower interest rates can stimulate economic activity. Consumers may be more inclined to borrow and spend money. Companies can invest in projects that they may have put on hold. And this has the potential to lead to stronger economic growth.

Additionally, investors are incentivized to take on more risk in order to achieve higher returns and offset the lower returns likely to be achieved with savings accounts. The environment for future stock prices is favorable, particularly for companies that may be more sensitive to economic forces.

The story continues

Low expectations create upside potential

As of this writing, shares of Nike are trading at a Price-earnings ratio (P/E ratio) of 22.3. This isn’t much higher than the cheapest valuation the stock has sold at in the last decade. And it’s a 41% discount to the average P/E ratio over the past 10 years. Obviously, expectations for Nike are low.

However, this increases the potential if there are even the smallest fundamental improvements. Given that revenue and diluted earnings per share fell a worrying 10% and 26%, respectively, in the first quarter of fiscal 2025 (ended August 31), the market may already be pricing in a worst-case scenario.

Believing the stock can rise 20% in a year isn’t a crazy assumption. A new CEO and improving economic conditions, combined with the low valuation, could be the recipe for getting to $100 per share in 2025.

Should you invest $1,000 in Nike now?

Before you buy Nike stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just identified what they think this is The 10 best stocks so investors can buy it now… and Nike wasn’t one of them. The ten stocks that made the cut could deliver huge returns in the years to come.

Think about when Nvidia created this list on April 15, 2005… if you have $1,000 invested at the time of our recommendation, You would have $765,523!*

Stock Advisor provides investors with an easy-to-understand roadmap to success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks per month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Neil Patel and his clients have no positions in the stocks mentioned. The Motley Fool has positions in Nike and recommends them. The Motley Fool has a disclosure policy.

The Prediction: Nike Could Reach $100 in 2025 was originally published by The Motley Fool