When we think of Dow Jones stocks, we think of strong companies that deliver stable earnings and income over time. We can also think of annual dividend payments. Certain stocks in the index, such as Johnson & johnson and Coca Cola – have even increased their dividends for 50 consecutive years. These types of investments are the backbone of many portfolios.
These actions are generally safe values. And that’s great. But that does not mean that the performance of their stocks is limited. In fact, there is a Dow Jones stock that could double your money. Its digital business has skyrocketed at the worst of the pandemic. And the post-pandemic future looks bright. What company are we talking about? Read on …
Ready for the pandemic
Another clue: think about the sport, the strength of the brand, and basketball legend Michael Jordan. This Dow stock is just a sportswear giant Nike (NYSE: NKE). The time was right for the company when it launched a digital, direct-to-consumer plan in 2017. By the time the pandemic hit, Nike was ready. Most of its stores have closed temporarily. And he missed sales related to sporting events – they were canceled.
But Nike’s digital sales have surged. The company also focused on its membership program and used its apps to keep fans connected. Nike has even launched products digitally through its Sneakers app. All of this helped Nike quickly recover once the retailer was able to open its physical stores.
The last quarter of the company offers us many positive clues about the future. Nike released its financial results for the fourth quarter last month. During this quarter, some stores in other parts of the world were temporarily closed. But North America had reopened as vaccinations increased and coronavirus cases declined.
Quarterly revenue increased 96% to $ 12.3 billion year over year. Of course, the period last year was weak due to the health crisis. It is therefore useful to compare the turnover to a pre-pandemic period. And here, too, we’re seeing growth – revenue increased 21% from the fourth quarter of 2019. Net income for the full year jumped 126% to $ 5.7 billion. One of Nike’s biggest achievements is its Jordan brand, even 18 years after the basketball player retired. The brand reached nearly $ 5 billion in sales during the year.
Key to recovery and future growth
Nike’s digital platform was the key to the recovery. But it is also the key to future growth. Experts say consumers’ online shopping habits are here to stay. This is great news for Nike. The company says digital revenue now accounts for 35% of its business, three years ahead of the original plan. Nike expects that figure to reach 50% by fiscal 2025.
Members of Nike’s loyalty program will also drive growth. The company now has 300 million members. They “have proven to be a compelling driver of repeated engagement and buying in digital and physical retail,” CEO John J. Donahoe said during last month’s earnings call.
Right now, Nike shares are trading at around $ 160. A review of another sportswear retailer with brand strength shows us that Nike could go much higher.
Lululemon Athletica, a maker of yoga-inspired clothing, trades for more than double the price of Nike. But Nike beats this business in terms of profit and revenue. And Nike is trading cheaper compared to forward earnings estimates. So the Nike stock at today’s level looks like a bargain.
NKE net income data (annual) by YCharts
Of course, a significant increase in stock prices is unlikely to happen overnight. But Nike has plenty of catalysts to drive consistent gains over time – and ultimately all the positive news could very well double the share price – and your money.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.