Why did Nike (NKE) shares gain 10% in January?

NYSE: NKE | Nike, Inc. Common Stock News, Ratings, and Charts

NKE – Investors are optimistic about Nike’s growth prospects following a strong finish in 2018. Category: Consumer Goods.

What happened


Shares of Nike (NYSE:NKE) gained 10.4% in value last month, according to data provided by S&P Global Market Intelligence. To be clear, there wasn’t any company-specific news last month. Instead, Nike’s strong earnings report in late December, along with the rebound in the broader market, helped send the shares higher in January. One analyst issued a positive report on Nike last month, which likely supported the stock performance as well.

So what

Nike has made a comeback over the last year after losing market share to rival Adidas. According to Nike’s fiscal second-quarter earnings report, sales of footwear rose 15% year over year on a constant currency basis, which drove growth in total revenue of 14%.

The swoosh brand has been rolling out new sneaker styles at a blistering pace lately. The fast cadence of new releases is a result of management’s strategy to double-down on speed in innovation and getting new products to market as quickly as possible.

Now what

Investors have taken notice of the improvement. Nike stock is up 22% over the last year, beating the S&P 500, which is down about 1%. One analyst with Cowen upgraded Nike shares to outperform citing the momentum in online sales and product innovation.

Management sees a significant growth opportunity in apparel. Footwear makes up two-thirds of annual revenue, but apparel has generally grown faster for Nike over the last year. Nike’s biggest apparel category is sportswear, in which sales increased 20% year over year in the previous quarter.

Analysts expect Nike to grow revenue by 7.8% in fiscal 2019 (which ends in May). This should translate to $2.65 per share in earnings, representing an increase of 11% year over year. Analysts currently estimate Nike will grow earnings 14% per year over the next five years, while the stock currently trades for a forward price-to-earnings ratio of 26.

John Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Nike. The Motley Fool has a disclosure policy.

 


Nike Inc. shares rose $0.21 (+0.25%) in after-hours trading Friday. Year-to-date, NKE has gained 11.09%, versus a 8.22% rise in the benchmark S&P 500 index during the same period.

NKE currently has a StockNews.com POWR Rating of A (Strong Buy), and is ranked #1 of 31 stocks in the Athletics & Recreation category.


This article is brought to you courtesy of The Motley Fool.

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