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Is the Nike Trade a No-Brainer this Earnings Season?
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Is the Nike Trade a No-Brainer this Earnings Season?


June 18, 2019
Is the Nike Trade a No-Brainer this Earnings Season?

Nike Inc. announces its Q4 earnings on June 27 amidst overwhelmingly bullish sentiment. It has recently been reported that over the last quarter a number of funds and family offices have increased their stake in the company. Many analysts have also given the company an “outperform” rating and upped their price targets for its stock to between $90 and $100. So, what exactly is everybody seeing?

The company has demonstrated strong growth despite increasing competition from Adidas, having outperformed its European counterpart in both the US and the growing market of China.
Nike’s revenue growth has been solid, with a 7% increase in North America for the previous quarter, to Adidas’s 5%. It has also been doing better in China, with revenue growth of 19%, to Adidas’s 16%.

There are, however, some concerns surrounding US-China trade relations. Not only has Nike been doing big business in China, in 2018 the company produced a quarter of all its shoes there, so Trump’s proposed 25% tariff is sure to hurt its bottom line.

The company was also recently embroiled in some controversy when an oversized mannequin appeared at its London store “celebrating the diversity and inclusivity of sport” and went viral. The company was lauded by some for taking steps to include more realistic representations of its customer base and accused by others of normalizing obesity. The public debate is not likely to harm the company in the slightest, though, with any and all publicity being good publicity in today’s day and age.

Nike general manager, Sarah Hannah, had the following to say on the subject: “To celebrate the diversity and inclusivity of sport, the space will not just celebrate local elite and grassroot athletes through visual content, but also show Nike plus size and para-sport mannequins for the first time on a retail space.”

Is the Nike Trade a No-Brainer this Earnings Season?

Back to the numbers, the market is expecting earnings per share of 0.81 per share, up from 0.68 per share last quarter. The chart look good too, with the company’s stock trading above its 52 week average. It has also set a couple of convincing higher lows on the weekly timeframe at around $71 and $77, respectively and is currently trading at around $82, within 10% of the company’s all time highs.

Can we expect a Q4 blue sky breakout come June 27?

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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June 18, 2019
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