Nike Shares Soar After Analysts Boost Price Targets Post Solid Q2 Earnings; Slowdown in China a Headwind

Nike shares surged nearly 6% in pre-market trading on Tuesday as several equity analysts raised their price targets after the world’s largest athletic footwear and apparel seller beat earnings estimates for the fiscal second quarter; however the steep decline in revenue from China was difficult to ignore.

The Beaverton, Oregon, footwear retailer reported earnings per share (EPS) of $0.83, beating the Wall Street consensus estimates of $0.73 per share. The company’s overall revenue rose 1% to $11.36 billion. That was also above the market expectations of $11.25 billion.

“Of concern, however, its sales in greater China fell 20% from 2020, missing our forecast of a 1% drop, and were flat versus 2019. Nike blamed the shortfall on supply shortages due to the virus-related factory shutdowns in Vietnam (since reopened) and store disruptions due to COVID-19 restrictions in China,” noted David Swartz, equity analyst at Morningstar.

“While we acknowledge these were factors, we also think there has been a (likely temporary) decline in demand for non-native sportswear from Chinese consumers in recent months. Nonetheless, we believe demand for Nike products in other regions is strong and expect to lift our per share fair value estimate of $128 by a low-single-digit percentage. However, we would look for a more attractive entry point; Nike’s current P/E of about 40is high on an absolute basis and as compared with the 10-year average of 34.”

Nike stock jumped nearly 6% to $166.0 in pre-market trading on Tuesday. It soared over 10% so far this year.

Analyst Comments

“Despite the Omicron unknowns, Nike’s (NKE) fiscal Q2 has confirmed a healthy demand backdrop (despite stronger than feared headwinds in China). Strong gross margin tailwinds were another highlight, with NKE confirming good progress in overcoming the Vietnam disruptions of this past summer. An only modest upgrade to FY guidance despite a 30% Q2 EPS beat could translate in limited uplifts to European peers,” noted James Grzinic, equity analyst at Jefferies.

Nike Stock Price Forecast

Twenty-four analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $185.30 with a high forecast of $202.00 and a low forecast of $160.00.

The average price target represents a 9.26% change from the last price of $169.59. Of those 24 analysts, 20 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $202 with a high of $367 under a bull scenario and $115 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Nike (NKE) beat Street estimates & guidance despite ongoing supply chain disruption. Guidance delivery likely gives investors confidence in NKE’s N-T path back to its L-T targets, as shown by the +4% AMC move. Disruption will linger through FY22, but the L-T oppty remains unchanged. Stay OW; PT to $202,” noted Kimberly Greenberger, an equity analyst at Morgan Stanley.

NKE is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~20% of ‘21 sales). Its DTC business (~37% of ‘21 sales) is igniting its next phase of margin-accretive revenue growth, driving a 16% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $192 from $189. Piper Sandler lifted the price objective to $183 from $174. Wedbush upped the target price to $185 from $170. Guggenheim increased the target price to $195 from $180. Truist Securities raised the target price to $196 from $190.

Technical analysis suggests it is good to buy now as 150-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

Instagram is Currently Exploring NFTs, CEO Reveals

The nonfungible token (NFT) space is one of the fastest-growing within the cryptocurrency industry, attracting major companies and celebrities in recent months. The sector is expected to record further growth over the coming months and years.

Social Media Giant is Entering the NFT Space

Instagram CEO Adam Mosseri has revealed that the social media giant is actively exploring the NFT space. The Meta-owned social media platform is the latest big company to enter the budding NFT industry.

Mosseri said, “Nothing to announce yet, but we are definitely actively exploring NFTs and how we can make them more accessible to a wider audience. I think it’s an interesting place that we can play…and also a way to hopefully help creators.”

This isn’t the first time Instagram is entering the NFT space. Earlier this year, the company hosted a panel for NFT creators in a bid to attract talent to its social media platform. Instagram designed the event to help creators grow their following and monetize their platforms.

Instagram’s desire to go deeper into the NFT space doesn’t come as a surprise as its parent company Facebook rebranded to Meta two months ago, a move that underlined its desire to explore the NFT and metaverse sector.

NFT Space Continues to Attract Big Companies

The past few months have seen numerous large companies enter the NFT space. Last week, Microsoft and Warner Bros became the latest companies to invest in the NFT space after backing startup Palm NFT Studio.

Other leading companies such as Adidas, Nike, Marvel, DC Comics, and several others entered the NFT sector area this year. The sector has also attracted numerous celebrities since the start of the year.

NFTs have become very appealing to music stars, movie actors and athletes of various sports. Former US first lady Melania Trump also launched her first NFT last week. The adoption is expected to continue as the sector is just starting to grow and grab people’s attention.

Instagram isn’t the only social media company that is expanding into the NFT space. Social media platform Parler announced earlier today that it would expand its business into nonfungible tokens.

Best Stocks, Crypto, and ETFs to Watch – Nike, Micron, Shiba Inu, and SPDR S&P 500 Trust in Focus

Omicron has put a damper on the 2021 holiday season while threatening first quarter disruptions, fueled by high numbers of workers on sick leave or isolating as a result of positive tests, even if asymptomatic. This could aggravate already disrupted supply chains and undermine investor sentiment, raising the potential for negative first quarter U.S. GDP. Economically sensitive funds, including SPDR S&P 500 Trust (SPY), could enter a correction during this period, favoring aggressive short sales.

Dow component Nike Inc. (NKE) reports Q2 2022 earnings after Monday’s closing bell, with analysts expecting a profit of $0.63 per-share on $11.25 billion in revenue. If met, earnings-per-share (EPS) will mark a 19% profit decrease compared to the same quarter in 2020. The stock failed a breakout above the August high at 174.38 in November and investors have been jumping ship since that time, worried that Omicron and pro sports cancellations will impact revenue.

Micron Technology Inc. (MU) broke out of a 7-month downtrend in November and stalled at the .618 Fibonacci retracement level of the 32-point decline about three weeks ago. It’s been oscillating in a trading range between 80 and 89 since that time while background technicals continue to improve.  As a result, market players are positioned for a strong report when the memory giant releases quarterly results in Monday’s post-market.

Shiba Inu broke November support at $0.00003510 at the start of December and has ticked lower into the second half of the month. It’s still trading above the long shadow carved during the Dec. 4th selloff, raising odds that sell stops are accumulating below $0.00002915. A violation of that price level could generate a rapid volatility spike, dumping the cryptocurrency into the .786 Fibonacci retracement level of September into October uptrend at $0.00002280.

The Omicron-induced flight to safety has benefited high dividend stocks that can weather economic headwinds.  General Mills Inc. (GIS) broke out to an all-time high last week, exhibiting high percentage gains rarely seen in the food production stocks. Adding to upside, the company pays a healthy 3.02% forward dividend yield that will ease pain when more favorable conditions return to the ticker tape. GIS reports Q2 2022 earnings ahead of Tuesday’s opening bell.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch in Holiday-Shortened Week: Micron Technology, Nike, General Mills and CarMax in Focus

The following is a list of earnings slated for release December 20-24, along with a few previews. Although next week’s earnings are unlikely to have much of an effect on major market movements, it is sufficient to gauge investors’ sentiment.

Earnings Calendar For The Week Of December 20

Monday (December 20)

IN THE SPOTLIGHT: MICRON TECHNOLOGY, NIKE

MICRON TECHNOLOGY: The world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has topped expectations on earnings per share at all times.

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report earnings per share of $0.62 in the fiscal second quarter, which represents a year-over-year decline of over 20% from $0.78 per share seen in the same period a year ago.

The Beaverton, Oregon, footwear retailer would post revenue of $11.23 billion, down about 0.1% from a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share.

“We are raising our price target to $189 representing 40x our FY23E EPS of $4.73. We don’t believe management will make significant changes to its FY22 guidance but view the business as running above plan in N. America and Europe (EMEA). The gross margin could be a lever to raise back to prior guidance (+150bps at the high end). China is a point of uncertainty with investors and the model,” noted John Kernan, equity analyst at Cowen.

“We are raising our expectations for Q2, largely driven by an incrementally stronger outlook for N.A. and EMEA, with less conviction behind results in Greater China. We now model Q2 revenues +3% y/y ex FX to $11.52B vs consensus of $11.255B, driven by N.A. +2% (+3% vs 2019 compared to Q1’s +14% vs 2019), EMEA +1% (+17% vs 2019compared to Q1’s +19%), Greater China -2%, and APLA +10%.

We forecast gross margin expanding +130bps y/y, as higher full-price selling and DTC mix offsets higher freight costs and some product cost inflation (we include gross margin quarterly bps drivers in Fig 5). On a 2-year stack basis, product costs have deleveraged 240bps or more in each of the last two quarters. We see SG&A dollars growing +10% y/y to 31.1% of revenues (+204bps y/y). Ultimately, this drives EPS of $0.75 vs consensus of $0.63 – we model a 100bps impact from FX.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 20

TICKER COMPANY EPS FORECAST
MU Micron Technology, Inc.(MU) $2.01
NKE NIKE, Inc.(NKE) $0.63
BRZE Braze, Inc.(BRZE) $0.63

Tuesday (December 21)

IN THE SPOTLIGHT: GENERAL MILLS

The Minneapolis Minnesota-based company, General Mills, is expected to report its fiscal second-quarter earnings of $1.05 per share down from $1.06 per share seen in the same period a year ago.

The consumer foods manufacturer’s revenue would decline over 2% year-over-year to around $4.8 billion up from $4.72 billion seen a year earlier. In the last two years, the company has missed earnings per share estimates only once.

“While growth abounded for domestic food manufacturers as consumers rushed to stock up on essential wares as COVID-19 took hold, it hasn’t been a pure panacea for this intensely competitive space. And we think the future trajectory hinges on which of the trends that took centre stage the past few years will hold,” noted Erin Lash, Sector Director at Morningstar.

“In this context, while we concede many consumers honed their cooking skills while sheltering at home, as busy schedules resume, we think food consumption will revert such that a greater portion of budgets is expended outside of the home, in line with pre-pandemic levels. Further, although grocers simplified shelf assortments to maximize productivity during the peak in demand, we think the variety will return as supply chains normalize.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

TICKER COMPANY EPS FORECAST
FDS FactSet Research Systems Inc.(FDS) $2.99
GIS General Mills, Inc.(GIS) $1.05
NEOG Neogen Corporation(NEOG) $0.17

Wednesday (December 22)

IN THE SPOTLIGHT: CARMAX

The used-car retailer CarMax is expected to report its fiscal third-quarter earnings of $1.49 per share, which represents year-over-year growth of about 5% from $1.42 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of nearly 50% to $7.63 billion in the quarter ended November 2021. In the last two years, the company has exceeded expectations on earnings per share with an average surprise of over 80%.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

KMX has consistently generated >$2,000 GPU and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

TICKER COMPANY EPS FORECAST
CTAS Cintas Corporation(CTAS) $2.62
KMX CarMax, Inc.(KMX) $1.5
PAYX Paychex, Inc.(PAYX) $0.79

Thursday (December 23)

No major earnings are scheduled for release.

Friday (December 24)

The New York Stock Exchange and Nasdaq observe Christmas, markets will be closed on Friday.

Preview: Nike Q2 Earnings to Decline But Could Raise Outlook Slightly

The world’s largest athletic footwear and apparel seller Nike is expected to report earnings per share of $0.62 in the fiscal second quarter, which represents a year-over-year decline of over 20% from $0.78 per share seen in the same period a year ago.

The Beaverton, Oregon, footwear retailer would post revenue of $11.23 billion, down about 0.1% from a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share.

However, better-than-expected results, which will be announced on Monday, Dec 20, would help the stock recoup recent losses. Nike stock surged over 16% so far this year.

Analyst Comments

“We are raising our price target to $189 representing 40x our FY23E EPS of $4.73. We don’t believe management will make significant changes to its FY22 guidance but view the business as running above plan in N. America and Europe (EMEA). The gross margin could be a lever to raise back to prior guidance (+150bps at the high end). China is a point of uncertainty with investors and the model,” noted John Kernan, equity analyst at Cowen.

“We are raising our expectations for Q2, largely driven by an incrementally stronger outlook for N.A. and EMEA, with less conviction behind results in Greater China. We now model Q2 revenues +3% y/y ex FX to $11.52B vs consensus of $11.255B, driven by N.A. +2% (+3% vs 2019 compared to Q1’s +14% vs 2019), EMEA +1% (+17% vs 2019compared to Q1’s +19%), Greater China -2%, and APLA +10%. We forecast gross margin expanding +130bps y/y, as higher full-price selling and DTC mix offsets higher freight costs and some product cost inflation (we include gross margin quarterly bps drivers in Fig 5). On a 2-year stack basis, product costs have deleveraged 240bps or more in each of the last two quarters. We see SG&A dollars growing +10% y/y to 31.1% of revenues (+204bps y/y). Ultimately, this drives EPS of $0.75 vs consensus of $0.63 – we model a 100bps impact from FX.”

Nike Stock Price Forecast

Twenty-two analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $183.71 with a high forecast of $213.00 and a low forecast of $160.00.

The average price target represents an 11.07% change from the last price of $165.40. Of those 22 analysts, 18 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $206 with a high of $372 under a bull scenario and $119 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

“Production shortfalls & transit delays likely make for an in-line 2Q & reiterated FY guidance. We’re focused on production ramp-up status, inventory levels, tactics to offset supply chain headwinds, & China sales trends. We remain bullish given compelling L-T growth opportunity. Raise price target to $206,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~20% of ‘21 sales). Its DTC business (~37% of ‘21 sales) is igniting its next phase of margin-accretive revenue growth, driving a 16% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Cowen and company lifted the target price to $189 from $180. Deutsche Bank raised the target price to $199 from $166. BofA Global Research increased the price objective to $170 from $160.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Check out FX Empire’s earnings calendar

Best ETFs For December 2021

Some huge sell days took place last month. But as you’ll see in the Big Money ETF Buys and Sells chart below, troughs tend to appear after huge sell days (like we just experienced). In other words, December has a bullish setup.

Going to MAPsignals.com, we can scan Big Money ETF Buys and Sells. Recent big selling (red bars) led markets lower as there was no huge buying (blue bars). We’ve seen a few big sell days this year. Notice what tends to happen after them? Blue bars.

Source: www.mapsignals.com

Long-term investors should look for ETFs (and their stocks), with great setups for the months ahead.

Remember: ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all strongest to weakest.

Let’s get to the 5 best ETF opportunities for December.

#1 Consumer Discretionary Select Sector SPDR Fund (XLY)

Consumer discretionary stocks have had a good year overall. Big Money has been buying XLY in chunks this year, especially lately. The fresh buy signals are possibly a play to capitalize on the mega-cap stocks in retail, home improvement, & more:

XLY holds solid stocks; one example is The Home Depot, Inc. (HD). Here are Big Money signals for HD:

#2 iShares MSCI USA Quality Factor ETF (QUAL)

As the name implies, this ETF is all about quality. With stocks, that means profitable, growing companies – the cream of the crop – and that’s what QUAL holds. There was a big washout around October (red bars), but look closely and you’ll see how big dips have preceded big rises:

One great stock QUAL holds is NIKE, Inc. Class B (NKE). It’s a long-time Big Money favorite with awesome fundamentals. As the multi-year chart below shows, when red appears on great stocks, it’s usually an opportunity to get quality on sale:

#3 iShares MSCI USA Momentum Factor ETF (MTUM)

The MTUM is a momentum-based ETF that holds a wide range of high-flying stocks (but they’re also subject to downward pressure). It’s been a solid performer all year, especially early on and then again in the latter part of 2021:

One big winner within MTUM is Tesla, Inc. (TSLA). It’s an outlier stock:

#4 iShares Russell 1000 ETF (IWB)

The first three ETFs were from the stronger part of my ranked list. Now we look for bargains by identifying weaker ETFs holding stocks with strong fundamentals. IWB holds large- and mid-cap U.S. stocks, which have driven markets upward for a while now. After recent highs, IWB has pulled back some, which could be an opportunity:

This ETF holds great stocks. One such winner is Microsoft Corporation (MSFT). Big Money loves it. The multi-year chart says don’t bet against it:

#5 iShares Core S&P Small Cap ETF (IJR)

We have a new MAPsignals author on the team, Alec Young. He brought IJR to our attention as it tracks the S&P 600, a cap-weighted index of U.S. small-cap equities. Such stocks are looking to grow. So, within an ETF like IJR, some new outliers could be flying under the radar. IJR has pulled back recently, but has strong potential over the long-term:

A great stock in IJR is Innovative Industrial Properties Inc (IIPR). It has the potential to be an outlier. Big Money has shown interest in IIPR because of its solid fundamentals, which helps make me a believer that it could thrive (as it has since Big Money dove in):

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a great opportunity
  • Repeated buying usually means outsized gains

Let’s summarize here:

XLY and QUAL rank high. MTUM, IWB, and IJR, however, rank lower on our list, due to weaker technicals. That’s why I think these weaker ETFs represent great potential bargains.

The Bottom Line

XLY, QUAL, MTUM, IWB, and IJR are my top ETFs for December 2021. November proved to be a dud relative to its usual performance. But 2021 can still end strong. Many ETFs and stocks have pulled back, especially recently, creating potentially attractive opportunities. There’s still a lot to like long-term.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in XLY, QUAL, MTUM, IWB, IJR, TSLA, MSFT, or IIPR, but holds long positions in HD and NKE in personal accounts at the time of publication.

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Wall Street Closes Lower on Jitters Ahead of Earnings, Fed Minutes

Adding to investor caution, the Federal Reserve is expected to release minutes on Wednesday from its last policy meeting, which market participants will scour for hints about when the U.S. central bank could begin tapering its massive bond-buying program.

All three major U.S. stock indexes ended in the red with the Dow down the most, weighed by healthcare and industrials.

Earnings unofficially kick off this week with results from JPMorgan Chase & Co on Wednesday and other banks to follow. JPMorgan’s shares shed 0.8% on the day, while the S&P 500 banks index edged down 0.6%.

Analysts expect to see strong U.S. profit growth for the third quarter. But a number of companies have warned of issues and investors are worried about how supply chain problems and higher prices will affect businesses emerging from the coronavirus pandemic.

“For the most part, institutional portfolio managers are of the view – let’s see what earnings look like and how much of a negative impact is being seen from shortages, higher rates and supply chain bottlenecks,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“A lot of those factors are currently reflected where equity prices are now.”

The Dow Jones Industrial Average fell 117.72 points, or 0.34%, to 34,378.34, the S&P 500 lost 10.54 points, or 0.24%, to 4,350.65 and the Nasdaq Composite dropped 20.28 points, or 0.14%, to 14,465.93.

Six of the 11 major sectors of the S&P 500 ended the session in the red, with communications services suffering the steepest percentage loss.

Tesla advanced 1.7% after data showed the electric vehicle maker sold 56,006 China-made vehicles in September, the highest since it started production in Shanghai about two years ago. The company’s shares provided the biggest boost to the S&P 500 and the Nasdaq.

Shares of American Airlines Group rose 0.8% after the company estimated a smaller-than-expected adjusted loss for the third quarter and signaled improved bookings for the rest of the year.

MGM Resorts surged 9.6% after of Credit Suisse upgraded the stock to “outperform” from “neutral.”

Nike Inc gained 2.0% after Goldman Sachs initiated coverage with a “buy” recommendation.

Investors also weighed comments from Fed Vice Chair Richard Clarida, who said the central bank has all but met its employment goal for reducing its bond buying program.

U.S. data showed the labor market remained tight, with a record number of Americans quitting their jobs and job vacancies numbering more than 10 million, stoking inflation fears as employers hike wages to attract and retain workers.

Wednesday’s consumer price index report will attract attention from investors seeking clues about inflation.

Advancing issues outnumbered declining ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 46 new highs and 94 new lows.

Volume on U.S. exchanges was 9.17 billion shares, compared with the 10.80 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain, Shreyashi Sanyal in Bengaluru and Federica Urso in Gdansk; Editing by Saumyadeb Chakrabarty, Arun Koyyur and David Gregorio)

U.S. Earnings Seen Strong, but Supply Chains and Costs Worry Investors

But as business continues to emerge from the coronavirus pandemic, new problems are arising that are taking center stage for Wall Street, including supply-chain snags and inflationary pressures.

In the run-up to earnings season, a number of companies have issued downbeat outlooks. FedEx Corp said labor shortages drove up wage rates and overtime spending, while Nike Inc blamed a supply-chain crunch and soaring freight costs as it lowered its fiscal 2022 sales estimate and warned of holiday-season delays.

“The pace of growth is decelerating, but still it’s at a meaningful level,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. With the product and labor shortages and inflationary pressures, “we’ll be looking to see to what extent demand is there, and what does it mean for the important holiday spending period.”

Analysts see a 29.6% year-over-year increase in earnings for S&P 500 companies in the third quarter, according to IBES data from Refinitiv as of Friday, down from 96.3% growth in the second quarter. The third-quarter forecast is down a touch from several weeks ago, a reversal of the recent trend for estimates.

Third-quarter earnings growth was always expected to be much lower than the blowout gain of the second quarter, when companies had much easier year-ago comparisons because of the pandemic.

“We were going up at such a high clip. The positive revision momentum has lapsed,” said Nick Raich, CEO of independent research firm The Earnings Scout.

Earnings season is kicking off this week with the big banks including JPMorgan Chase.

SUPPLY CHAINS, COSTS

Investors are weighing the impact of sharply higher energy costs on businesses and consumers after a recent surge in oil and natural gas prices. While higher energy prices should be a boon for energy producers, they are an inflationary risk for many other companies like airlines and other industrials and cut into consumer spending.

U.S. companies have so far this year kept profit margins at record levels because they have cut costs and passed along high prices to customers. Some investors are anxious to see how long that can go on.

Third-quarter earnings arrive with the market still wobbly after a weak and volatile September. The S&P 500 in September registered its biggest monthly percentage drop since the onset of the pandemic in March 2020. It was also the index’s first monthly decline since January.

Analysts are skeptical about how much is priced in.

“COVID-related supply chain issues have spread beyond consumer goods. And longer-term signs of global friction are easy to find,” Savita Subramanian, head of U.S. equity & quantitative strategy at BofA Securities, wrote in a note on Friday. But she said these issues are far from being fully priced into stocks.

Morgan Stanley’s analysts say that consensus earnings expectations also have not fully priced in the supply-chain constraints facing companies, making it much harder for companies to surpass estimates at the same rate as in recent quarters.

“Consumer Discretionary companies of all kinds are right in the cross hairs of the supply shortages, higher logistics costs and higher labor costs,” they wrote. Those strategists see the equity market set for a bigger pullback, and say third-quarter earnings could determine how deeply the stock market dips.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch in New York; Editing by Megan Davies and Matthew Lewis)

Why Nike Stock Is Down By 7%

Nike Stock Falls Amid Worries About Supply Chain Problems

Shares of Nike found themselves under pressure after the company released its quarterly results. Nike reported revenue of $12.25 billion and GAAP earnings of $1.16 per share, missing analyst estimates on revenue and beating them on earnings.

Nike suffered from problems in the global supply chain, as well as from the lockdown in Vietnam. The situation with coronavirus in Vietnam remains challenging, and it looks that Nike and other players will have problems with production in Vietnam for months to come.

The market is always forward-looking, so traders ignored Nike’s earnings performance and focused on the outlook for the upcoming quarters which will be hurt by production problems and supply chain issues.

What’s Next For Nike Stock?

Analysts expect that Nike will report earnings of $4.23 per share in the current fiscal year and $5.02 per share in the next year, so the stock is trading at roughly 30 forward P/E even after the recent pullback.

While such valuation levels are typical for leading companies in today’s markets, they do not provide companies with much room for error. In Nike’s case, worries about the negative impact of supply chain problems have immediately put significant pressure on the company’s shares.

Back in August, Nike stock reached all-time high levels above $174, but it has already declined below the $150 level. It remains to be seen whether value-oriented investors and traders will rush to buy Nike stock after the pullback as the stock is not cheap while earnings estimates have been trending lower in recent weeks. In fact, they may continue to move lower as analysts adjust their models to the new reality where supply chain problems persist for many months. In this environment, Nike stock will certainly need more upside catalysts to break the current downside trend and return to growth.

For a look at all of today’s economic events, check out our economic calendar.

Nike’s Shares Decline Further After Cutting Revenue Forecast

The shares of sports apparel manufacturer Nike are down by more than 6% today after the company cut its revenue for the fiscal year.

Nike Cuts Revenue Forecast For 2022 Fiscal Year

Sneaker giant has been underperforming over the past 24 hours since the company revealed that it had cut its revenue forecast for the 2022 fiscal year. The company decreased its revenue forecast for the fiscal year to account for labor shortages, longer transit time and extended production shutdowns in Vietnam.

According to the sports apparel manufacturer, the full-year sale for 2022 is set to increase at a mid-single-digit pace, which is lower than the previously estimated low double-digit growth. In Q2, Nike’s sales were flat and didn’t grow more than 10%. Analysts were expecting its revenue to grow by 12% for the year, as well as 12% for the second quarter of the current fiscal quarter.

Nike’s revenue was $12.25 billion, which is lower than the $12.46 billion analysts had predicted. However, the earnings per share of $1.16 were better than the $1.11 that market analysts had predicted.

Over the coming quarters, the company said it expects its business to experience short-term inventory shortages. The CFO, Matt Friend, said the prolonged shutdown of operations in Vietnam had affected the company’s inventory.

Nike manufactures roughly 50% of its footwear and 30% of its apparel in Vietnam. The government had to shut down the facilities as it tried to curb the spread of the Coronavirus. Friend told analysts that Nike had lost ten weeks of production, and the gap will continue. As such, he expects it to take the company months to ramp up production.

NKE Down By Over 6% Today

The shares of Nike are down by more than 6% today, following the losses recorded yesterday. NKE is trading at $149 per share, down by more than 6%. The losses started yesterday after the news broke out, and NKE suffered further losses during the pre-trading session.

NKE stock chart. Source: FXEMPIRE

Year-to-date, NKE’s performance has been average. The stock has been up by less than 10% since the start of 2021. The Covid-19 pandemic has affected the company’s operations, similar to some of the other major brands globally.

Marketmind: Move over Evergrande, Time to Watch Soaring Bond Yields

A look at the day ahead from Saikat Chatterjee.

European and U.S. stock futures fluctuated between gains and losses after U.S. stocks posted their biggest two-day rise since July.

While a large part of those gains can be attributed to easing concerns about Evergrande contagion, Thursday’s spike in yields in the global $60 trillion plus government debt markets raised the prospects of tighter monetary policy sooner than later.

Long-term U.S. Treasury yields have surged the most in 18 months as traders brought forward expectations for the first Fed rate hike to the end of 2022 and the Bank of England opened the door to a 2021 rate increase — sparking the biggest jump in two-year UK gilt yields since March 2015.

Yield curves from Australia to Germany bear steepened in response and the dollar sprung to the top of its 2021 trading range. While it remains to be seen whether the rise in yields can be sustained, some signs of weakness can be detected in the “buy the dip” trade from investors.

Value stocks, a beneficiary of higher yields, outperformed growth ones on Thursday while FAANG stocks have underperformed broader markets so far this month. And if investors are hoping quiet weekend, think again.

Sunday’s election in powerhouse European economy Germany will provide food for thought as Chancellor Angela Merkel steps down after 16 years in charge.

Her successor will play a new role in shaping domestic and broader EU policy and have to steer Germany’s economy through a still uncertain post-COVID environment.

Thursday’s flash PMIs for September pointed to a sharp slowdown in economic activity from the previous month from rising energy prices and difficulty in sourcing parts and materials, headwinds that are unlikely to abate in the coming days.

Key developments that should provide more direction to markets on Friday:

– ECB’s Lagarde says many causes of inflation spike temporary: CNBC

– Nike warns on holiday delays, cuts full-year sales estimate

– Daimler’s Mercedes-Benz to take a 33% stake in battery cell manufacturer Automotive Cells Company

– Germany’s IFO survey for September

– Fed speaker corner: Powell, Clarida

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saikat Chatterjee; Editing by Dhara Ranasinghe)

Nike Shares Decline Nearly 4% After Company Slashed Full-Year Revenue Outlook

Nike shares plunged nearly 4% in extended trading on Thursday after the world’s largest athletic footwear and apparel seller slashed its full-year sales forecast and warned of delays during the holiday shopping season.

According to a Reuters report, the Beaverton, Oregon, footwear retailer has revised its sales forecast, now expecting a mid-single-digit growth rate for the full year instead of the low-double-digit rate it previously projected. Nike also predicted flat to slightly down revenue growth in the second quarter due to factory closures.

The company’s revenue rose 16% to $12.2 billion in the fiscal first quarter ended August 31, missing the market expectations of $12.6 billion.

Following this, Nike shares slumped about 4% to $153.32 in extended trading on Thursday.

However, the company’s diluted earnings per share surged 22% to $1.16, above the Wall Street consensus of $1.12 per share.

Analyst Comments

Nike’s (NKE) F1Q shows ongoing brand strength, the consumer is spending and not price sensitive, China sales continue to rise, and the LT model is solid. Supply chain disruption, coupled with normalized demand creation expense, dampens flow through, but the supply chain is a temporary issue,” noted Randal J. Konik, Equity Analyst at Jefferies.

“With NKE’s l-term DTC model best-in-class among global consumer companies, we still see shares up at least 25% over the next 12 months.”

Nike Stock Price Forecast

Twenty-four analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $186.68 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 16.98% change from the last price of $159.58. From those 24 analysts, 20 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $201 with a high of $362 under a bull scenario and $117 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Nike’s (NKE) stock fell 4% AMC as management cut FY22 guidance to reflect limited inventory availability from factory closures and transit delays. We remain bullish despite the cut, as transitory headwinds should abate and underlying demand for NKE products appears robust. We stay Overweight & trim our price target to $201,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Nike (NKE) is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~20% of ‘21 sales). Its DTC business (~37% of ‘21 sales) is igniting its next phase of margin-accretive revenue growth, driving a 16% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

Check out FX Empire’s earnings calendar

Marketmind: Some Relief – But How Long Will it Last?

A look at the day ahead from Dhara Ranasinghe.

U.S. stock futures, the yuan and the risk-sensitive Australian dollar are riding high, while the safe-haven yen and U.S. Treasuries are on the back foot.

Don’t get too comfortable — even if Evergrande makes its Sept. 23 onshore bond payment, it has not indicated whether it can pay $83.5 million in interest due on its March 2022 bond on Thursday. Nor is there any sign the Chinese government plans to mount a last-minute rescue.

And with the U.S. Federal Reserve set to conclude its two-day meeting later on Wednesday, perhaps this week’s market excitement is not over yet.

After all gas prices are at lofty levels, threatening to hurt consumption, which means central banks meeting across the globe this week are likely to be challenged on the message that inflation is transitory.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

It might however clear the way for tapering later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.

The Bank of Japan just kept monetary policy steady but offered a bleaker view on exports and output, reinforcing expectations it won’t join peers mulling a withdrawal of crisis-mode support.

Elsewhere, Democrats in the House of Representatives passed a bill on Tuesday to fund the U.S. government through Dec. 3 and suspend a borrowing limit until end-2022. Senate Republicans however have vowed to block it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech, IG Group

– U.S. earnings: Nike

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

Preview: What to Expect From Nike’s Q1 Earnings on Thursday

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion. In the last four quarters, on average, Nike has beaten earnings estimates over 55%.

According to ZACKS Research, for fiscal 2022, the company expects to grow revenues in the low-double digits, surpassing $50 billion because of strong customer demand across its segments.

The company expects revenue growth in the first half of fiscal 2022 to be higher than in the second half. The foreign exchange rate is expected to be a tailwind in fiscal 2022, generating 70 basis points of gains, ZACKS Research added.

Nike shares surged over 10% so far this year but the stock closed 0.75% lower at $156.42 on Friday.

Analyst Comments

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt. guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

Nike Stock Price Forecast

Twenty-five analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $187.26 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 19.72% change from the last price of $156.42. From those 25 analysts, 21 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $221 with a high of $410 under a bull scenario and $127 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

“Disruption from COVID-19, supply chain pressure and China continue to escalate. Our contacts across the global supply chain suggest Vietnam could reopen by October. Port congestion and freight headwinds could ease into 2H 2022 and the sector’s 10% valuation correction has improved risk/reward,” noted John Kernan, equity analyst at Cowen.

“We are cutting our FY22 Nike sales estimate by 300bps to 9% growth with a robust recovery into FY23.”

Check out FX Empire’s earnings calendar

Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

Nike Shares Fall on Global Supply Chain Woes

Supply chain problems have wreaked havoc on companies around the world over the past year. The pandemic-fueled global supply chain issues have thrown a wrench into the operations of companies across sectors.

Worse, global supply chain problems are not going to subside anytime soon, according to high-profile economist Mohamed El-Erian. He predicts that supply chain constraints will stick around for another one to two years, or longer. This is a setback for companies like Nike that are right in the middle of the supply chain disruption.

Wall Street firm BTIG is not optimistic and has downgraded Nike’s stock from buy to neutral as a result. Shares of Nike tumbled more than 2% in response to the downgrade.

Nike’s stock is hovering below its all-time high of $174 and currently trades for just below $160. Investors who believe that Nike will weather the storm and use its pricing muscle to mitigate the damage might see the downturn as a buying opportunity, though it’s unclear where the bottom might be.

Factory Fears

BTIG’s bombshell downgrade was in response to factories in Vietnam that were forced to be shut down due to the spread of the virus, which has had a ripple effect on the supply chain.  BTIG analyst Camilo Lyon wrote in a report,

“We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for NKE as it is now facing at least two months of virtually no unit production at its Vietnamese factories.”

The factories in question comprise more than half of Nike’s footwear production and nearly one-third of apparel items. The timing couldn’t be worse, with the holiday season right around the corner and vaccinations becoming more prevalent so that retail sales could benefit.

Vietnam is suffering from another wave of the pandemic, particularly in Ho Chi Minh City, which has triggered restrictions in the economy and crippled the manufacturing sector.  A mere 5% of Vietnam’s population has been vaccinated from COVID-19.

Nike Not Alone

While Nike’s issues might begin in Vietnam, the supply chain disruption is a global problem. As a result, other brands are feeling it too. Athletic apparel company Lululemon, for example, experienced a 61% jump in Q2 revenue, but the supply chain is still a worry. They similarly source a good chunk of their apparel from Vietnam and are having to scramble as a result. Nonetheless, Lululemon has a strong sales outlook for 2021.

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks rallied yet again, sending the S&P 500 to its sixth consecutive all-time high. Investors celebrated jobless claims showing that the economy is back on track. Weekly jobless claims came in at their lowest level since the pandemic reared its head.

The Nasdaq also finished higher while the Dow Jones Industrial Average added more than 100 points amid a strengthening economy and a second-quarter earnings parade that is just getting underway.

Energy stocks were a bright spot in the session after WTI crude oil surpassed USD 75 per barrel. Dow member Chevron benefited from the bullish sentiment and tacked on about 1.5%

New in the Hood

The market was abuzz about Robinhood’s IPO filing. The commission-free trading app has been generating revenue hand-over-fist as the retail-investor-fueled meme stock craze has taken shape. Now Robinhood seeks to capitalize on that demand and list on the Nasdaq under a sign-of-the-times trading symbol, HOOD. To demonstrate how popular the app has become, Robinhood generated USD 522 million in Q1 2021 revenue vs. USD 127.6 million in the corresponding year-ago period.

Stocks to Watch

Nike gained 2% on the day after touching on a new all-time high. The sports apparel company turned in impressive sales results and investors expect the momentum to continue.

Walgreens did not receive the same reception on Wall Street even though it also produced a solid quarter. The stock was down 7% in the session despite having lifted its outlook for the year. Investors are still ahead as the stock is up more than 20% year-to-date.

Meme stock AMC Entertainment shed 4% in the session. The stock’s market cap is currently just over USD 27 billion but the company has billions of dollars of debt on its balance sheet. Investors might be starting to think twice about the sustainability of the valuation.

Look Ahead

Investors should keep an eye on Virgin Galactic on Friday.  Billionaire Richard Branson will reportedly head into space on July 11, nine days before rival Jeff Bezos’ space flight. The stock is up more than 4% in extended-hours trading.

On Friday, the much-anticipated Employment Report for June will be released at 8:30 a.m. ET. Wells Fargo predicts that hiring accelerated in June vs. May and that the economy added 750K non-farm payrolls.

Stocks Gear Up for Monday After Record-Setting Performance

Stocks rallied on Friday as investor fears about inflation faded even after the Federal Reserve turned unexpectedly hawkish recently. The S&P 500’s modest gains were enough to send the index to yet another record high, reaching 4,280.70.

Financial stocks helped to catapult the broader market index higher after banks passed the Fed’s stress test with flying colors, giving them the all-clear to distribute dividends and buy back shares once again. May personal consumption expenditures, data that monetary policymakers use to gauge inflation, rose 3.4% YoY, as expected, which helped to tame inflation worries.

The S&P 500 advanced 2.7% for the week, its biggest weekly gain since early 2021. The Dow Jones Industrial Average also closed in the green, fueled by gains of more than 15% in apparel stock Nike. Meanwhile, the Nasdaq took a slight step backward after feeling pressure from higher bond yields.

In early Sunday evening, stock futures are higher across the board as investors look to keep the rally going and potentially send the S&P 500 to another new peak. This week, all eyes will be on Friday’s employment report, but there are some stocks to keep an eye on in the interim.

Stock Spotlight

Nike might have risen by a double-digit percentage on Friday, but there could be more room for this growth stock to run. Not only did Nike see its quarterly revenue about double YoY, but both the company and Wall Street expect the good times to continue.

UBS analysts said in a report that Nike has not yet reached a top, as the company continues to benefit from a shift in consumer behavior toward healthier habits as well as its own digital push. UBS has a price target of USD 185 on the stock, which closed last week at USD 154.

Other Stocks to Watch

  • GameStop muscled its way into the large-cap scene. As expected, the meme stock was added to the Russell 1000 index after qualifying once its market cap ballooned by billions of dollars YTD.
  • On the earnings front, Bed Bath & Beyond, which has attained meme stock status among retail investors, will report its quarterly earnings on Wednesday.

Look Ahead

On the economic front, there are a handful of indicators to watch out for. On Thursday, the Construction Spending report will be released for May. Also on Thursday, investors will get a read on ISM Manufacturing for June after the index beat estimates in May, climbing to a reading of 61.2.

And finally, on Friday, the employment report for June will be released after the economy added nearly 560K new jobs in May. Wells Fargo predicts that the economy added 750K non-farm payrolls in June, according to a report.

Why Nike Stock Is Up By 15% Today

Nike Stock Surges After Strong Quarterly Report

Shares of Nike gained strong upside momentum and moved to all-time highs after the company released its quarterly earnings report. Nike reported revenue of $12.3 billion and earnings of $0.93 per share, easily beating analyst estimates on both earnings and revenue.

The company showed strong growth despite recent problems in China. In fact, there was no mention of boycott in China, and it is clear that this recent incident had no material impact on Nike’s business in the country.

Nike’s brand remains very strong, and the company enjoyed gross margin of 45.8% in its fiscal fourth-quarter as Nike’s digital efforts continued to pay off. The company also noted that it repurchased 50 million of its shares for $4.7 billion during the fiscal fourth quarter.

What’s Next For Nike Stock?

The company’s performance is spectacular, and analysts have already rushed to change their estimates. Currently, analysts expect that Nike will report earnings of $3.9 per share in the current fiscal year and $4.59 per share in the following fiscal year, but these estimates will soon be rewritten.

It is obvious that demand for Nike’s products is very strong while the company managed to use the opportunities presented by the pandemic to accelerate its digital transformation, which had a positive effect on margins.

Currently, the stock is trading at about 33 forward P/E which is a reasonable valuation level for the current market environment, especially if we take Nike’s strong growth into account.

The 15% jump in just one trading session is a huge move for the company whose market capitalization exceeds $200 billion, and it remains to be seen whether Nike stock will be able to gain additional upside momentum in the near term or it will face some resistance due to profit taking. In the long-term, Nike remains fundamentally attractive.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Friday

An infrastructure deal was reached in Washington, D.C. and stocks were up on Wall Street. The S&P 500 set a new record high after rising fractionally to 4266.49. The broader market index last reached a new high in mid-June. The recent Fed-induced losses did not last long as investors decided to look at the market glass as half-full.

The Dow Jones Industrial Average isn’t too far from its new all-time high after tacking on about 1% in Thursday’s session. The Nasdaq was fractionally higher. Some of the standouts in today’s session include:

  • Tesla gained 3.5%, extending yesterday’s rally.
  • Caterpillar rose 2.6%, reclaiming some ground it lost on inflation and rate-hike fears last week.
  • FedEx stock is down in extended hours despite experiencing record Q4 earnings and revenue that increased 27%. The company swung to a profit after a quarterly loss in the year-ago period, reporting net income of USD 1.87 billion, or USD 6.88 per diluted share. The transportation company’s services have been in high demand throughout the pandemic, including the delivery of vaccines. The stock is seeing heavy options activity including bullish expectations for shares to gain as much as 18% by the July expiration of contracts.

Stocks to Watch

Nike stock is up 11% in after-hours trading after beating on the top and bottom lines with Q4 results. The company’s results were driven by a recovery in the North American region, where sales grew more than twofold YoY to a new peak of USD 5.38 billion. Nike also experienced robust results in China and its digital sales segment. The trend of comfortable clothing is persisting even after the lockdowns have lifted.

In addition, The Trade Desk, an ad stock, gained 17% today and is trading higher in the after-hours. The stock is benefiting from Google’s decision to delay its move to do away with cookies until 2023. Google is making the change in response to privacy concerns and was initially expected to remove the tracking tech next year.

Look Ahead

On the economic front, personal income and spending for May will be released on Friday. Now that the government stimulus checks are a thing of the past, the expectations are for a further decline in personal income. It will likely not be of the same magnitude as the 13.1% MoM drop in April over March levels, but economists, nonetheless, are expecting a decline. Personal spending is expected to rise slightly.