Prediction: Nike Could Be Headed to $100 in 2025

Nike (NYSE: NKE) is going through an extremely difficult stretch in its corporate history. The business is dealing with soft demand trends, and it just recently announced a major leadership change.

Therefore, it's no wonder this top consumer discretionary stock has dropped 13% in the past 12 months. That's during a time that saw the S&P 500 put up a total return of 35%.

But I believe that Nike shares could rise 20% and head to $100 in one year. Here are three reasons why.

The return of Elliott Hill

Since January 2020, John Donahoe was Nike's CEO. He helped the business navigate the COVID-19 pandemic, supply chain issues, inflationary pressures, and rising interest rates. However, under his leadership, Nike's stock has tanked. Shareholders would agree that it's time for a change.

Elliott Hill, a longtime veteran of the sportswear giant who retired in 2020, starts his new job as CEO on Oct. 14. And his top priority must be to make Nike a beacon of product innovation. Additionally, Hill needs to reverse Donahoe's previous stance of cutting ties with wholesale partners.

Having a new CEO come in certainly adds an element of uncertainty for shareholders. It also doesn't help that Nike decided not to provide financial guidance for the current fiscal year, and that it is postponing its Investor Day, which was originally scheduled for November.

However, Hill worked at Nike for 32 years, starting out as an intern and rising through the ranks to become president of consumer and marketplace before his retirement. There might be no person who knows this business at a fundamental level from all angles more than he does. And his fresh perspective can be exactly what the troubled business needs right now, particularly when it comes to identifying the core issues and providing effective solutions for them. Investors have reason to be optimistic that he can turn things around.

Better macro backdrop

The economic situation is another reason to believe Nike shares can increase to $100 in 2025. The Federal Reserve believes that it finally has inflation under control, which prompted the central bank's move to cut the benchmark interest rate for the first time in more than four years. This could be the start of a sustained accommodative monetary policy.

All else equal, lower interest rates can boost economic activity. Consumers could be more inclined to borrow and spend money. Businesses can invest in projects that they might have shelved. And this has the potential to lead to stronger economic growth.

Additionally, investors are incentivized to take on more risk in order to achieve higher returns and make up for the lower yields that savings accounts are likely to earn. The backdrop for equity prices looking ahead is favorable, especially for companies that might be more sensitive to economic forces.

Low expectations add upside

As of this writing, shares of Nike trade at a price-to-earnings (P/E) ratio of 22.3. This is not that much higher than the cheapest valuation the stock has sold for in the past decade. And it's a 41% discount to the trailing-10-year average P/E multiple. Clearly, expectations for Nike are low.

But this adds upside should there be even the smallest fundamental improvements. Given that sales and diluted earnings per share dropped a troubling 10% and 26%, respectively, in the fiscal 2025 first quarter (ended Aug. 31), the market could already be pricing in a worst-case scenario.

Believing that the stock can jump 20% in a year's time is not a crazy belief to have. A new CEO and improving economic conditions, in combination with the low valuation, can be the recipe to get to $100 per share in 2025.

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.