Nike shares soared to an all-time high in October. A report from Evercore ISI called the athletic wear company “the next mega-cap juggernaut” among major performers like Apple, Google and Amazon. The stock is up 176 percent in the last five years. That’s more than double the 80 percent return of the S&P 500 in the same period of time.
Evercore analyst Omar Saad raised the company’s price target from $150 to $200 per share saying it is “becoming one of those rare franchises that almost everyone uses almost every day.”
Nike’s reliably strong results highlight the strength of the sports apparel industry and the company’s ability to grow and continue as the industry leader. One of the ways it’s doing so is by teaming up and powering Apple’s wearable tech gadgets and being at the forefront of the coming revolution integrating fitness with technology.
Though consumers associate wearable technology with products like Google Glass or the Apple Watch, Nike created the FuelBand, the predecessor to the Apple Watch, several years ago. The Nike FuelBand is an activity tracker worn on the wrist that could be integrated with an Apple iPhone, iPad or Android device. It recently shuttered the project to team up on wearables with Apple.
The partnership with Apple is still in its fairly early stages but seems a success. Before the release of the Apple Watch, Nike CEO Mark Parker has said that the two companies were developing a new product that would have “greater integration with existing gadgets. “
The majority of the demand in wearable tech originates in athletics and expected to explode in growth in the next ten years, especially as China and Asia take more interest in health and fitness. Nike and Under Armour are the leaders in the sportswear and wearables industry and likely to take a big portion of that consumer market.
Besides being a wearable tech leader, Nike’s sportswear and sneaker division is thriving. While other companies are in a battle to underprice each other, Nike is raising prices on their gear.
At its investor conference, Nike’s management laid out a plan to earn $50 billion in annual revenue by the end of fiscal year 2020. That compares to $30.6 billion in fiscal 2015. That’s a 63 percent increase in revenues in less than five years.
The plan relies on China and Asia’s increasing interest in fitness, growing the company’s online sales, and almost doubling its women’s business from from $5.7 billion per year to $11 billion per year within five years.
The aggressive plan faces some challenges as China experiences financial turmoil and a slowing economy in Europe. Under Armour may also prove to be competition for Nike. The company, whose stock has skyrocketed almost one thousand percent in the last five years, has been working on other wearables featuring a new biometric compression shirt that measures heart rate, metabolism, lung capacity, and body position for optimal performance.
But as more consumers embrace athletic wear and wearable tech products, the future is bright for Nike.