2018 Bull/Bear Outlook: Can Nike Keep Pace in 2018?

Companies and Brands

Published: January 5, 2018 11:10 am

Last Updated: January 12, 2020 4:47 am

Now that 2018 is underway, investors need to realize that this raging bull market in stocks is nearing nine years old. The year 2017 brought gains of 25% in the Dow Jones Industrial Average (DJIA) and almost 19.5% on the S&P 500. While this is the strongest bull market that most have seen in their lifetime, investors should be wary of their expectations for 2018.

24/7 Wall St. just came out with its annualized forecasting bias for the stock market in 2018. It looks like DJIA at 26,400 and at least 2,855 on the S&P 500 are now the baseline targets for this year.

It’s also worth pointing out that on the heels of tax reform, Credit Suisse is now targeting 3,000 and Oppenheimer is targeting 2,900 for the S&P 500 in 2018. At the end of 2017, the forward valuation for the S&P 500 Index was 18.5 times to 19.0 times expected earnings per share.

Nike Inc. (NYSE: NKE) stock trades with a 27.6 forward price-to-earnings (P/E) multiple against fiscal 2018 expected earnings. This is expensive compared to the markets in general, but with the run that Nike saw in 2017 and the outlook for 2018, this multiple is deserved.

Nike is recognized across the globe as one of the premier names in sports apparel and shoes. While the company merits a premium for its stock, it shouldn’t scare investors away because there is much more in store.

Analysts are calling for Nike to return 4.08% to investors in 2018, or a total of roughly 5.3%, including its dividend yield of 1.23%. This might not seem like much compared to 2017, but analysts are constantly re-evaluating their positions and the number is expected to push higher from here if markets stay on track.

In its most recent quarter, Nike saw its total footwear revenues increase by 4% and total apparel revenues grow 9%. However, this was a push more from international sales than domestic. While a weaker dollar could help Nike going forward, it seems that the demise of its main rival Under Armour has spurred some of Nike’s growth in just this past quarter alone. If both of these factors continue, Nike could be on track for another solid year.

Nike has a 52-week trading range of $50.35 to $65.19 and a market cap near $103 billion. Its weighting in the Dow is about 1.76%, but the rank is roughly 49th of the S&P 500.