Why Nike Inc (NKE) Stock Is the Real Winner of the NBA Finals
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The 2017 NBA Finals are over, and the Golden State Warriors didn’t blow it like they did last year. Unlike the 2016 NBA Finals, the Warriors held on to their commanding 3-1 lead in the best of seven series and knocked off the upset-hopeful Cleveland Cavaliers.
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Under Armour Inc (NYSE:UAA) investors are happy about this. UAA stock is up almost 20% since the start of June.
The growth narrative is pretty simple. Stephen Curry, the star point guard of the Warriors, and his surging popularity drove UAA stock higher in 2015. But the 2016 NBA Finals meltdown marked a turning point in Curry’s popularity and the UAA growth story. The 2017 NBA Finals, where Curry and the Warriors won, could mark a turnaround for the better.
But that growth narrative is a tad too simple. The real winner of the NBA Finals is Nike Inc (NYSE:NKE).
Here’s why.
Nike Has Kevin Durant
Anyone who even just casually watched the NBA Finals will tell you that the real story of the NBA Finals wasn’t the return of Steph Curry, but rather the rise of Kevin Durant, the do-it-all forward the Warriors traded for in the off-season.
And Durant is a Nike guy.
Durant was awarded the Finals MVP, not Curry, after scoring more than 30 points in each of the five Finals games. Curry only crossed the 30-point-mark twice.
ESPN, Sports Illustrated and Fox Sports are all dominated by Durant headlines, not Curry headlines. FiveThirtyEight even put out a piece stating that the Warriors are now Durant’s team, not Curry’s team.
That seems to be a consensus in the basketball world. It is no longer a debate between Curry and LeBron James about who is the best player in the league.
It is now a Durant versus James debate.
And that’s great for Nike, because both of them are Nike guys.
Bottom Line on NKE Stock
Nike management has talked plenty on recent calls about the strong momentum they are feeling in the basketball business. I don’t think it’s any coincidence that this momentum coincides with Durant’s sudden transformation into a household favorite.
That transformation finished in spectacular fashion on Monday night with Durant being crowned an MVP and a champion.
I interpret this as meaning that the momentum Nike’s basketball business felt earlier this year is just the tip of the iceberg. Ever since the Michael Jordan era, NKE has dominated the basketball world. That dominance has been threatened recently by Under Armour, but the UAA threat is receding. Durant stealing the show from Curry solidifies Nike’s leadership position in the secular growth athletic footwear market.
NKE stock is just too cheap here to ignore that big of a long-term catalyst. The current valuation is hovering near a two-year low, and that’s because investors are worried about competition heating up.
While Adidas AG (ADR) (OTCMKTS:ADDYY) is still very much in vogue, Under Armour continues to fade from the spotlight, especially in basketball. The numbers will show this over the next few quarters, and Nike stock should benefit from both higher estimate revisions and multiple expansion over the next several months.
NKE stock is a buy here.
As of this writing, Luke Lango was long NKE.
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