by Ian Harvey
August 26, 2019
A Nike OCT 18 2019 90.000 options call trade was recommended on Monday September 23, 2019 to Stock Options Made Easy “Earnings Predictions” members; and since then the price of the options trade has increased 208%.
Nike Inc. (NYSE: NKE), a seller of athletic footwear and athletic apparel worldwide, saw its stock price jump 4.2% to close at $90.81 on the stock market yesterday after reporting earnings that were a near-perfect fiscal first quarter that beat expectations.
Nike earnings jumped 29% to 86 cents a share, its best year-over-year gain in several years. Revenue grew 7% to $10.66 billion. Nike's growth was broad-based, both geographically and across product lines. North America sales climbed 4% to $4.293 billion. China sales shot up 22% to $1.679 billion, or 27% excluding currency shifts.
In early August, Nike stock plunged below its 50-day and 200-day moving average, but it's rebounded to take both those key levels.
Now, Nike shares are in all-time high territory!
Although expectations were very high heading into the first quarter, Nike was able to clear the bar with an earnings report that was solid from top to bottom.
YOU NEED TO BE IN TO PROFIT!
Wedbush Securities analyst Christopher Svezia rates NKE stock as outperform with a 100 price target. He believes the firm is continuing to "expand the market and drive consumer industry innovation."
"There remains numerous areas of upside opportunity to both the 2Q and incrementally stronger FY20 outlooks, including: Nike App initiatives, Nike Fit, RFID and other productivity strategies, clean/seasonable inventory, a robust product pipeline, and more," he added in a Wednesday research note.
While UBS analyst Jay Sole is neutral on Nike stock, he hiked his price target from 87 to 95. He said he is holding off on an upgrade due to "uncertainty around the magnitude of new opportunities." However he believes Nike could win big if it can expand its share in the women's market.
"Nike owns 9% global footwear market share, but only 0.6% women's apparel share, according to Euromonitor," he said in a research note, also out Wednesday. "Nike's women's business has been stuck at roughly 22-23% of total Nike sales for 5 years,despite major efforts to improve. We believe women's outgrew men's in Q1 and accelerated quarter over quarter. If Q1 represents the start of a new, long chapter for Nike where it gains women's apparel share, it would mean big EPS and stock price upside."
PiperJaffray analyst Erinn Murphy said that, although North American revenues were light for Nike, she sees jersey comps, footwear launch timing and an extended back-to-school season as reasonable explanations.
“Importantly, Nike sees North American growth accelerating sequentially across the balance of [the] year. Despite greater currency headwinds, incremental tariff pressures and a more uncertain backdrop than 90 days ago, Nike raised underlying and reported FY20 guidance,” the analyst said.
Management expects Q2 reported revenue growth in line with Q1 growth, dampened by currency headwinds, and warned that the impact of tariffs will be "most pronounced" in Q2. Nike sees high-single-digit, full-year sales growth, with gross margins expanding by 50-75 basis points.
Credit Suisse analyst Michael Binetti said he continues to be impressed by Nike’s ongoing global brand momentum, fueled by outperformance from international, digital and scaling innovation platforms.
“Importantly, in a tough macro, we think Nike is one of a few companies that can confidently point to an acceleration in near-term revenue trends,” the analyst said.
Credit Suisse raised its 2020 earnings estimate from $2.91 to $3. Credit Suisse maintained an Outperform rating and raised the price target from $97 to $105.
As well added to the conversation, with Stifel analyst Jim Duffy saying that, within 12-18 months, he expects Nike's gross margins to return to 46% and modest SG&A leverage to puts mid-teens EBIT margins in sight.
With high single-digit/low double-digit growth, improving margins and share repurchases, Stifel expects a multiyear period of EPS growth in the high teens to low 20s, the analyst said.
Stifel maintained a Buy rating and raised the price target from $96 to
Next Earnings for Nike.....
For full-year 2020, the footwear and apparel giant is expected to report earnings of around $2.73 to $3 per share. Sales are expected to grow at a high-single-digit range to $42.09 billion. The company sees gross margin growth of 50 to 75 basis points.
What Can You Do?
Find out what we are recommending “Stock Options Made Easy" members to do.....
What will “Stock Options Made Easy” advise members to do?
More "Earnings Predictions" will be out before trading starts on Monday.
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!