NIKE, Inc. (NKE) Stock Is Back in Fashion

A snafu in Lululemon Athletica inc. (NASDAQ:LULU)’s supply chain earlier this year may have supplied just the opportunity Nike and others needed. A batch of errant “see-through” pants has left stores out of stock in some of the most desirable fashions the company offers.

This is one area where Nike can actually compete on cost, offering yoga pants for a lower price than Lululemon Athletica inc. (NASDAQ:LULU). That’s not usually a selling point for Nike, but it might be in this case.

Nike stock has upside
If Nike can execute on the keys I’ve highlighted, I think the stock has plenty of upside. Nike has been growing at high single or low double digits over the past three years, and that trend should continue as emerging markets spend more on athletic gear and Nike expands its product line.

From a margin standpoint, NIKE, Inc. (NYSE:NKE) is actually lagging behind both Under Armour and Lululemon, but that means there’s either an opportunity to improve margins or to undercut these companies on cost (like in yoga).

NKE Gross Profit Margin Quarterly data by YCharts.

Nike stock trades at 25 times earnings, which is a reasonable price given the upside potential I’ve highlighted. I’m confident enough in the company’s future to make an outperform call on MyCAPS. Follow this and the rest of my picks here.

The article Nike Stock Is Back in Fashion originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica, Nike, and Under Armour and owns shares of Nike and Under Armour.

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