How to Trade Nike's 27% Surge on Pricing Power & Metaverse Trend
Analysts at Goldman Sachs and Guggenheim have turned bullish on the long-term prospects for Nike shares.
While Goldman Sachs analysts cite the pricing power Nike has to hedge against stagflation, analysts at Guggenheim cite Nike’s entry into the metaverse as a driver for long-term growth.
Either way, the recent 21% drop in Nike’s stock price presents an interesting scenario for long-term investors.
Learn more about it further below.
|Symbol for Invest.MT5 Account:||NKE|
|Date of Idea:||19 January 2022|
|Time Line:||1 - 6 months|
|Position Size for Invest.MT5 Account:||Max 7%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade the Nike Stock Price?
Nike stock managed to gain nearly 200% since the lows of the pandemic. It is perhaps the most dominant athletic consumer goods company in the world. The results reflect this too. The latest earnings report showed better-than-expected earnings per share and revenue figures.
Analysts have turned increasingly bullish on the long-term potential of Nike shares of which some are highlighted below.
Reason 1: Strong pricing power potential to hedge against stagflation
According to investment banking giant Goldman Sachs, stocks such as Nike would likely benefit if stagflation fears continue to rise. Stagflation is an economic situation in which prices continue to rise while the economy slows.
It’s a difficult problem for central banks as there are not many tools available to help fight inflation and an economic slowdown at the same time.
But Nike could be an interesting hedge against stagflation as companies that have pricing power – the ability to increase prices and keep them steady regardless of what the economy is doing – could benefit the most.
The ability to maintain its profit margins despite a slowdown in the economy is an interesting scenario for investors.
Reason 2: Nike’s foray into the metaverse this year could be a game-changer
Analysts at investment bank Guggenheim named Nike its ‘best idea’ for 2022. Not only do they point to the dominant market share of the company but they are also focused on the potential of Nike’s digital strategy which could bring a new era of dominance for the company.
Nike’s new digital strategy includes a push into the metaverse and Web 3.0. This includes a metaverse studio, digital sneakers and potential video games. At the end of last year, Nike announced the acquisition of digital sneaker-maker RTFKT.
The company has also teamed up with Roblox to create Nikeland – a virtual world where users can dress up their avatars in Nike-branded sneakers and apparel.
The Guggenheim analysts are forecasting earnings per share estimates for 2023 of $4.85 from $4.50 and have a price target of $195 on the stock.
Nike Stock Forecast - What do the Analysts Say?
According to analysts polled by TipRanks for a Nike stock forecast, there are currently 17 buy ratings and 4 hold ratings. The highest price target for the stock is from Morgan Stanley at $202.00 with the lowest price target at $170.00. At the time of writing Nike was trading around $147.00.
The average price target for a Nike stock forecast is $187.60 which represents a nearly 27% upside from current levels.
Source: TipRanks, 18 January 2022
An Example Trading Idea for the Nike Stock Price
An example trading idea for the Nike stock forecast could be as follows:
- Buy the stock around $147.00.
- Target the average analyst price target at $187.60.
- Keep your risk small at a maximum of 7% of your total account.
- Time Line = 1 – 6 months
- If you buy 10 Nike shares:
- If target is reached = $406.00 potential profit ($187.60 - $147.00 *10 shares).
It’s important to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises. Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in Nike stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy Nike Stock in 4 Steps
With Admirals, you can buy shares in US companies like Nike with a low commission of just $0.02 per share and a low minimum commission of just $1.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for Nike at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance.
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Do You See the Nike Stock Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance Nike's share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.
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