Buy Nike? Morgan Stanley Says Just Do It

In a recent report, Morgan Stanley analysts laid out their case for why Nike Inc NKE will continue to outperform in the next three years. Analysts cite Nike’s superior innovation and marketing execution, its increasing presence in growing worldwide markets, and the overall worldwide trend toward healthy living as three major drivers of a nine percent compound annual growth rate (CAGR) for Nike over the next three years.

Apparel gets athletic
Analysts believe that athletic wear will continue to grow in the overall apparel space in upcoming years. Consumers are participating in more active, athletic activities than ever before. This athletic lifestyle is spreading to emerging market economies, where the luxury of sports apparel and equipment is becoming more commonplace in recent years.
In addition, Nike’s innovative materials, designs, and technology continue to drive revenue for the company. Analysts also note the comfort of most athletic wear and the trend toward accepting this type of attire as appropriate casual wear.
Catalysts
The report discusses the buildup to the upcoming 2016 Rio Olympics as a potential catalyst for Nike. Analysts also believe that the wearable device market, currently in its infancy, will explode in upcoming years. According to the report, the percentage of consumers who own a wearable fitness device should exceed 25 percent within the next few years.
Forecast for Nike stock
Morgan Stanley has an Overweight rating on Nike stock. Analysts see a base case price objective of $105, a 10 percent upside from the stock’s current price. This price is projected based on an assumed 22 price to earnings ratio and 2015 earnings per share of $4.80.