Analysts Say This Could Be A Potential Game Changer For Nike

Given Nike Inc NKE's less than stellar current consumer and investor sentiment, revolutionary new innovation will likely be the catalyst to bring the company back into the public's good graces.

Scott Krasik of Buckingham Research believes this innovation could emerge from a product called “flyleather.”

Announced on Sept.18 as a new super material, flyleather is a more sustainable material that is 40 percent lighter than leather, five times more durable and uses 90 percent less water.

“We believe flyleather has the potential to be a game changing innovation for NKE over the next three to five years,” said Krasik.

Less Is More

Flyleather is a leather substitute made from at least 50 percent recycled natural leather fiber and waterpower, resulting in a more durable and lightweight performance product.

Krasik affirms this new innovation could drive costs of goods sold significantly lower and also reduce traditional leather costs after driving down demand. Only one shoe is commercially manufactured with the material.

“We see Nike shifting to completely replacing leather with flyleather over time,” said the analyst.

Flyleather is approximately 25 percent less expensive to manufacture footwear with than traditional leather, allowing Nike to ultimately realize approximately $1 in incremental EPS, according to Krasik. A shift to the material could also dramatically lower the demand and in turn the cost for traditional leather. 

“In our view, this is considerably more important discussion topic for investors interested in NKE for the long-term than whether U.S. sales may inflect positively in two, three or four quarters from now,” he concluded.

Buckingham research reiterated a Buy rating on Nike with a $64 price target.

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