Nike and the Self-Lacing Shoe

07/19/2016 8:00 am EST


Our latest featured stock’s “swoosh” logo and “just do it” tagline are widely recognized around the world, asserts Roy Ward, editor of Cabot Benjamin Graham Value Investor.

Nike (NKE) is the global leader in athletic footwear and apparel with operations in over 160 countries.

Its portfolio brands include the Nike Brand, Jordan Brand, Hurley and Converse.

Nike also has contracts for supplying the official uniforms and apparel for the National Basketball Association and National Football League.

The company’s association with celebrity athletes, such as Michael Jordon and Roger Federer as well as with top professional and college teams, ensures top-notch name recognition for the future.

Nike recently announced its creation of a self-lacing athletic shoe. The sensor system will automatically tighten the shoe and maintain consistent pressure set by the wearer.

The shoe, dubbed the Nike HyperAdapt 1.0, is due to go on sale before Christmas 2016 and could be another big hit.

Nike reported disappointing sales and earnings for the quarter ended May 31, 2016. Excess inventory in the US temporarily hindered sales.

However, the European Soccer Championships and the Olympics in Brazil will provide exceptional marketing opportunities for Nike.

At 25.5 times current EPS, NKE shares are now reasonable. Sales and earnings growth will likely accelerate in 2016. The balance sheet is solid.

The dividend has been increased almost every year by more than 10% over the past decade. Dividend increases will likely average 17% annually during the next five years.

NKE has declined 22% from its 52-week high. I expect NKE to climb 60% to reach my minimum sell price target of $85.18 within one to two years.

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By Roy Ward, Editor of Cabot Benjamin Graham Value Investor

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