Buy Nike After Earnings? Here’s Why You Would

Nike  (NKE) – Get Report shares soared after earnings, but that doesn’t mean not to buy the stock now. The company, large and economically sensitive, is somewhat of a growth play and has been treated by the market as such.

Before we analyze, let’s look at the earnings and the stock.

Earnings

Nike reported earnings Tuesday after the closing bell and wiped the floor clean on analysts’ estimates. Here were the results:

  • Revenue: $10.6B v. $9.13B (actual result: -1% year-over-year)
  • North America Revenue: $4.225B vs. $3.43B (-1%)
  • China Revenue: $1.78B vs. $1.87B (+8%)
  • Operating Margin: 16.1% vs. 9.6% (14% last year)
  • Adjusted EPS: 97 cents vs. 47 cents (+11%)

Digital sales rose 82% as consumers largely stayed at home. Management said foot traffic was weak and that the strength came less from generally strong consumer demand and more from e-commerce capabilities and product and brand strength. Costs nearly stayed in check as well, helping drive EPS, which was expected to fall more than 40%.

Management also raised its fiscal year 2021 (ends in May) guidance to slight revenue growth rather than flat.

The Stock:

The stock rose more than 8% to $127 a share Wednesday. The shares have also doubled from their late March lows and are 22% higher than their pre-COVID 2020 highs. That’s more than a V-shaped recovery — it’s emblematic of a company coming through the pandemic fundamentally stronger than it was prior to it. Analysts are also quick to note as much. E-commerce awareness is on the rise and Nike continues to leverage its various online sales channels to foster brand loyalty and adoption.

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