Nike is in an uptrend

Posted Nov 23rd 2009 1:40PM by Joseph Lazzaro
Filed under: NIKE, Inc'B' (NKE), Stocks to Buy

After meandering for most of the summer, Nike Inc.'s (NKE) stock has accelerated above its 50-day moving average, and that's one reason I'm Reiterating my Buy rating for the company's shares, first recommended on May 12, 2009 at a price of $50.98. If you bought NKE in May, you're up about 27%.

Look for Nike to record a roughly 7-9% earnings gain in 2010, aided by emerging market sales gains. What's more, the major source of institutional investors's (IIs') concern this summer – U.S. sales – appears to be fading: 2010 U.S. sales will likely drop 2-3%, due to the continued 'frugal consumer' trend – a down year but certainly not a disaster, for NKE, which does about 60% of its business outside the U.S. The First Call FY2010/FY2011 EPS estimates for NKE are $3.65 to $4.01.

Technically, as noted, Nike's stock has resumed its uptrend, and recently gapped-up above psychological resistance at $60. Nike should trade above $80 in 2010; near $90 if U.S. GDP growth in 2010 registers an upside surprise.

Stock Analysis: Nike Inc. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in NKE now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your NKE position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $43.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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Reader Comments (Page 1 of 1)

11-23-2009 @ 5:20PM

noah said...

I think your wrong and that NKE is in fact in the upper end of its trading range. NKE will trade lower as the stock is too expensive at these levels. The valuations dont support the stock.

10/22/09 Nike Inc. co-founder and Chairman Phil Knight sold another $21.2 million of Nike stock Wednesday, bringing his six-day total to $206.7 million, according to documents filed with the U.S. Securities and Exchange Commission.

Knight sold the shares for between $64.13 and $66.34.

The raised dividend indicates that NKE feels growth has slowed substantially and will continue to do so.