Can Nike Stock Nearly Double To Pre-Inflation Shock Highs Of Over $175?

Core Viewpoint - Nike's stock is currently trading at $94 per share, approximately 47% lower than its peak of $176 in November 2021, indicating potential for gains despite facing supply chain constraints and a slow recovery in China [1][2] Financial Performance - For the first nine months of fiscal 2024, Nike's revenue grew by only 1% year-over-year to nearly $39 billion, while earnings per share increased by 7% year-over-year to $2.74 [1] - Nike's inventories were reported at $7.7 billion, down 13% compared to the previous year, contributing to higher profit margins [1] - The gross margin for Nike was 44.5%, reflecting a 100 basis point increase year-over-year in the first three quarters of 2024 [1] Market Comparison - Nike's stock has declined nearly 13% year-to-date, while its peer Lululemon's stock has dropped 40% in the same period [2] - Over the past three years, Nike's stock has underperformed the S&P 500, with returns of 18% in 2021, -30% in 2022, and -7% in 2023, compared to the S&P 500's returns of 27%, -19%, and 24% respectively [3] Future Outlook - Nike's management anticipates only 1% revenue growth for the full fiscal year 2024 and plans to cut expenses by $2 billion over the next three years to improve operating profit margins [2] - The stock's valuation is estimated at around $101 per share, suggesting a potential upside of nearly 7% from the current market price [3] Historical Context - The timeline of the inflation shock indicates that inflation rates peaked at 9% in June 2022, significantly impacting market conditions [4][5] - During the 2007-2008 financial crisis, Nike's stock fell approximately 30% from its pre-crisis peak, but rebounded by about 59% by early 2010 [6] Revenue Trends - Nike's revenues increased from $44.5 billion in FY 2021 to $51.2 billion in FY 2023, although earnings per share fell by 9% to $3.30 in FY 2023 due to inflation affecting consumer spending and rising freight costs [7] Conclusion - With the Federal Reserve's actions to control inflation potentially improving market sentiment, there is optimism for Nike's stock to achieve strong gains once recession fears subside [8]