Nike Set to Benefit from Expiring NFL Apparel Deal, Citigroup Reports

When Reebok's exclusive NFL apparel deal concludes at the end of next season, Nike is expected to swoop in and score a five-year deal beginning in 2012. As a result, Citigroup is reiterating its Buy rating and $91 price target. “Over the last 10 years, Nike's average year forward P/E multiple has been ~17x,” Citigroup writes. “We apply a ~17x multiple which is around Nike's 10- year average multiple since we see top line trends and EPS growth improving. Applying this multiple to our FY12 EPS drives a $91 valuation.” Citigroup considers Nike to be a low-risk investment due to its large market capitalization, strong debt rating with stable outlook, average historical stock price volatility, relatively stable earnings, and healthy free cash flow. Nike currently trades for $81.98.