Can Nike Continue This Bullish Run?

 
on April 08 2013 4:57 PM
The Nike Speedsuit. The white patches at the arms and legs are designed to add aerodynamics to the runner.
The Nike Speedsuit. The white patches at the arms and legs are designed to add aerodynamics to the runner. Nike

With shares of Nike (NYSE:NKE) trading around $60, is NKE an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Nike is engaged in the design, development and worldwide marketing and selling of footwear, apparel, equipment, accessories and services. The company sells its products to retail accounts, through Nike owned retail stores and internet sales, and through a mix of independent distributors and licensees, in approximately 190 countries around the world. Nike focuses its product offerings in seven key categories: running, basketball, soccer, men’s training, women’s training, Nike sportswear and action sports. As the staying active movement is on the rise, Nike is poised to see profits well into the future. T = Technicals on the Stock Chart are Strong Nike has seen a tremendous uptrend over the last decade. The stock is currently trading at all-time highs, something that has been very familiar over the last few years. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Nike is trading above its risking key averages which signal bullish price action in the near-term.

NKE

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Nike options may help determine if investors are bullish, neutral, or bearish.

Nike Nike  http://wallstcheatsheet.com/

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Nike Nike  http://wallstcheatsheet.com

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Nike’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Nike look like and more importantly, how did the markets like these numbers?

Nike Nike  http://wallstcheatsheet.com

Nike has seen increasing earnings and revenue growth for most of the last four quarters. From these figures, the markets have become increasingly more pleased with Nike’s last earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Nike stock done relative to its peers, Crocs (NASDAQ:CROX), Deckers Outdoor (NASDAQ:DECK), Skechers USA (NYSE:SKX) and sector?

Nike Nike  http://wallstcheatsheet.com

Year-to-date, Nike has been an average performer relative to its strong peers and sector.

Conclusion

Nike operates a well recognized brand worldwide and provides products perceived as top quality by consumers and businesses across the globe. The stock has been on a monster run over the last few years and is now trading at all-time high prices on support by strong earnings and revenue growth. Relative to its peers and sector, Nike has been an average performer in a high performing area of the stock market. Look for Nike to continue to OUTPERFORM.

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