|Day's Range||0.2500 - 0.6600|
Futures fall: The stock market rally and Fed rate cuts are no match for President Trump's escalating China trade war. Watch Apple, Boeing, Tesla, Micron and Nike.
The ongoing trade war was escalated yet again on August 23 after China announced that it would be imposing new tariffs on $75 billion worth of U.S. goods and restarting levies on U.S. autos. President Trump then tweeted a response ordering U.S. companies to find alternatives to Chinese manufacturing, sending the market on a downward spiral, with both the S&P 500 and NASDAQ falling 3%. Amid all of this, investors were left wondering if there’s any hope left for retail stocks as tariffs present a substantial threat to the space. Adding to the bad news, the latest escalation sent the SPDR S&P Retail ETF plummeting 4%. However, Guggenheim’s Robert Drbul believes one retail stock can emerge as a winner in spite of heigtened tensions. On the same day the tariff news broke, the analyst deemed Nike Inc. (NKE) a “best idea” in the retail space while downgrading Macy’s Inc. (M) to a Hold. Let’s take a closer look at what Drbul had to say about these two retail stocks. Nike Inc. (NKE)While Nike shares dropped 3% amid tariff fears, the five-star analyst believes the dip represents a unique buying opportunity. “We think the concerns over tariffs and market conditions responsible for sending Nike stock lower have created a compelling entry point,” Drbul explained. He adds that NKE’s long-term growth narrative remains unchanged based on several recent positive developments.Despite the fact that its June 27 fourth quarter release revealed an earnings miss, Drbul notes that the revenue beat was a strong result on both a reported and constant currency basis. Its digital sales from its app and online store have helped drive this growth, with it accounting for 30% of the revenue mix. NKE’s digital sales could get another boost with the launch of Nike Fit, its feature that scans a customer's foot to determine the correct size shoe the customer should be wearing. Investors have more reasons to be excited as NKE has maintained its commitment to expanding its product offerings. These efforts include the scaling of its React sneakers as well as its new Joyride running shoes and AeroAdapt clothing line. Not to mention the company has made significant improvements to the supply chain with its use of digitized design, automated production and 3D printing.“Additionally, we believe NKE is one of the best-positioned names in our group to mitigate tariff risk through potential price increases,” Drbul added. Based on all of the above factors, he reiterated his Buy rating and $100 price target. The analyst thinks share prices could surge 24% over the next twelve months.All in all, the Street takes slightly less optimistic stance on NKE. 14 Buy ratings vs 3 Holds and 1 Sell received over the last three months add up to a ‘Moderate Buy’ analyst consensus. Its $95 average price target suggests 18% upside potential. Macy’s Inc. (M)The Guggenheim analyst paints a much bleaker picture of Macy’s long-term growth prospects, downgrading the stock as he no longer believes that the headwinds facing the company are going away.Much of the bearish sentiment surrounding the retail stock can be attributed to a weak second quarter earnings release on August 14 that revealed earnings came in well below consensus estimates. The results showed that EPS plummeted an alarming 60% year-over-year. Its bottom line also took a beating with gross margin decreasing by 160 bps to 39%. Management is trying to get back on track by discounting most of its spring inventory to make room for next season’s clothing, but this move could weigh heavily on revenue. The company also announced that it would place a significant focus on expanding its vendors and its stock keeping units (SKU) as well as maintain a “mobile first” strategy. The mobile app will be updated to include feature improvements like quickly picking up orders, easier access to recommendations and offers and connecting customers with Macy’s stylists. On top of these efforts, Macy’s partnered with fashion resale company thredUp on August 14\. Management hopes this will give it access to a younger customer base that wants to support sustainable fashion.While Drbul acknowledges the efforts made by Macy’s, he doesn’t believe it will be enough to pull the retailer out of its earnings rut. The company faces stiff competition from eCommerce giants like Amazon (AMZN) and must mitigate the impacts of tariffs on the business. “We respect management’s attempts to move fluidly in the ever-evolving retail environment, but we no longer see the secular headwinds facing the company abating and are moving to the sidelines on the shares. While we would welcome additional store closures and further debt paydown, with tariffs looming large, we have limited visibility into M’s ability to sustain and/or grow earnings in 2020,” Drbul explained. As a result, he downgraded M to a Hold from a Buy and removed his $20 price target entirely. Overall, Wall Street takes a bearish stance on Macy’s. It has a ‘Moderate Sell’ analyst consensus and an $18 average price target, implying 21% upside potential. Find analysts’ favorite stocks with the Top Analysts’ Stocks tool
NIKE, Inc. (NYSE:NKE) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that...
It's no secret that soccer is one of the world's most beloved sports and, in turn, the most beloved athletes. Find out which soccer players are paid the most in 2019.
President Trump raised China tariffs late Friday, as the China trade war spirals. The Dow Jones dipped after plunging in Friday's session. So did Apple, AMD, Tesla and Nike.
Investors waiting on encouraging comments from leaders such as Fed Chairman Jerome Powell and President Donald Trump did not get what they were hoping for Friday.Source: Shutterstock Stocks tumbled after President Trump took to Twitter (NASDAQ:TWTR) to -- you guessed it -- deride China AND the Fed. As I noted on Thursday, Powell's comments from the Jackson Hole economic conference today took on added importance after the FOMC minutes out earlier this week indicated the July rate cut doesn't mean more are coming. A pair of Fed governors affirmed that notion Thursday.Put simply, Powell's Wyoming remarks weren't dovish enough for the president or markets as evidenced by Friday's tumble. Trump pondered on Twitter "My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?"InvestorPlace - Stock Market News, Stock Advice & Trading TipsSpeaking of China, the world's second-largest economy is promising new tariffs on U.S. goods, an overture to which Trump had plenty to say."The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP," said the president on Twitter. "Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing .your companies HOME and making your products in the USA. I will be responding to China's Tariffs this afternoon. This is a GREAT opportunity for the United States. Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop - it didn't. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!"All of that conjecture gets us to a glum end of the week with Nasdaq Composite sinking 3% while the S&P 500 lost 2.59%. The Dow Jones Industrial Average slid 2.37%. In late trading, just one Dow stock was in the green: Boeing (NYSE:BA). Too Many Losers on the DowIn late trading, 19 of the 29 Dow offenders were lower by 2% or more, underscoring just how bad of day it was for equities. Among those losers were plenty of tariff-sensitive names, including Apple (NASDAQ:AAPL), which was the worst performer in the Dow today with a loss of 4.62%.In other news, it's hard to get excited about a stock like Nike (NYSE:NKE) on a day when trade tensions surge and Foot Locker (NYSE:FL) plunges on bad earnings. Shares of Nike reflected as much with a Friday slide of 3.33%, but at least one analyst defended the athletic apparel giant. Guggenheim named Nike to its "best ideas" list today.The research firm said "the company is positioned well to maneuver through tariff risks, and that Nike's latest earnings and robust product pipeline were impressive. Also of note, Nike has joined 31 other major retailers in signing a pact for better environmental efforts, which will be presented at this weekend's Group of Seven (G-7) summit," according to Schaeffer's Investment Research.In the search for good news today, one that was difficult as it pertains to members of the Dow Jones Industrial Average, another tidbit I have to offer up is Betsy Graseck, global head of banks and diversified finance research at Morgan Stanley, making some bullish comments on Dow components American Express (NYSE:AXP) and JPMorgan Chase (NYSE:JPM) in an interview with Barron's.Graseck highlighted JPM's big buybacks as earnings booster and the ability of American Express to weather a recession thanks to its more affluent clientele.In other glum news, oil prices traded lower and already-struggling shares of Exxon Mobil (NYSE:XOM) were hit wit a downward price target revision with UBS paring its forecast on the stock to $75 from $87. That new target still implies some decent upside from today's close for the largest domestic oil company. Bottom Line on Dow Jones TodayI don't like sounding alarm bells, but the president's comments directed toward China today are very hard to retract. To be fair, he's on point when it comes to the fentanyl issue, but ordering U.S. companies to stop manufacturing in China is a gambit that will not bear fruit anytime soon.This trade war, now reaching new, ominous heights, is likely to stoke recession speculation. The only good news there is that the Fed will likely attempt intervention via rate cuts.Todd Shriber does not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks to Buy on the Dip * 7 Marijuana Stocks With Critical Levels to Watch * 7 Internet of Things Stocks to Buy Now The post Dow Jones Today: Hello Darkness, My Old Friend appeared first on InvestorPlace.
Nike was named a "Best Idea" by Guggenheim, which cited its direct-to-consumer strategy and robust earnings among the key rationales.
The major stock indexes were lower early Friday after China retaliated with new tariffs. Meanwhile, Fed chief Powell's comments buoyed some stocks.
Stocks fell on a new round of China tariffs, while Salesforce.com and Intuit took big gains, and Fed Chair Powell's overshadowed early trade.
Morgan Stanley put out an interesting note in recent days which broadly outlined a handful of stocks to buy given their robust exposure to SHEconomy tailwinds.If you had to do a double-take there, don't worry. SHEconomy is not a commonly used term in the financial world, or any world for that matter. But, it is a term that you should get comfortable with, and quickly. Understanding the SHEconomy could help you pick winning stocks for the next several years.Broadly speaking, the SHEconomy is the part of the U.S. economy that is driven by women (hence the "SHE"). Morgan Stanley argues that this part of the economy is booming, and driving much more economic growth than the part driven by men. InvestorPlace - Stock Market News, Stock Advice & Trading TipsThey are right. The data here is indisputable (sourced from here and here). There are three big factors at play here: Click to Enlarge * Single women are taking over. The number of single women in the U.S. (never married, divorced or widowed) has grown at a 1.6% compounded annual growth rate since 1990. Single women as a percentage of the total U.S. population, ages 16 and up, has risen from ~23% in the 1990s, to ~24% in the 2000s, to ~25% in the 2010s. * The women workforce is expanding. The number of working women in America, ages 16 and up, has grown at a 1.3% CAGR since 1990, while as a percentage of the total workforce, women have gone from ~43% representation in the 1990s, to ~44% in the 2000s, to ~44.5% in the 2010s. Click to Enlarge * Women's purchasing power is growing. Weekly average earnings for women in the U.S. have grown at a 3% CAGR since 1990 (versus 2.5% for men), while women have gone from earning 30% less than men in the 1990s, to ~25% less in the 2000s, to ~22.5% less in the 2010s.In other words, these are three secular demographic trends that have been in play for nearly three decades. They will remain in play for the next several decades, too, given current societal constructs pushing towards greater gender equality and female empowerment. Click to EnlargeAs such, the SHEconomy will continue to be the "growth" part of the U.S. economy for the foreseeable future, and will provide meaningful tailwinds for companies that female consumers love. * 10 Marijuana Stocks That Could See 100% Gains, If Not More With that in mind, here's a list of eight SHEconomy stocks to buy to play this demographic mega-trend, according to Morgan Stanley. Lululemon (LULU)Source: Richard Frazier / Shutterstock.com One of Morgan Stanley's top SHEconomy stocks to buy is Lululemon (NASDAQ:LULU), and I couldn't agree more with this pick.Anyone who knows the athletic apparel market will tell you that women everywhere are obsessed with Lululemon. Why? It's a fashion statement item in the athletic apparel space. Basically, it's that brand in the athletic apparel space that is the perfect combination of expensive and superior quality to where if you wear it, you're cool.Don't believe me? Believe Piper Jaffray's bi-annual Taking Stock With Teens Survey, which has consistently found over the past several years that Lululemon is one of the -- and often, the single most -- in-demand clothing brand among young female consumers. Or, better yet, believe Lululemon's comparable sales growth rates, which above consistently north of 10% for the past several quarters now.In other words, Lululemon is one of the SHEconomy's most-beloved brands, and the numbers support this. SHEconomy tailwinds should continue to propel Lululemon's revenues and profits higher over the next several years, which should in turn lead to big gains for LULU stock. Nike (NKE)Source: Shutterstock Another one of Morgan Stanley's top SHEconomy picks that I 100% agree with is Nike (NYSE:NKE).Sure, Lululemon is the coolest athletic apparel brand for women. But, Nike is a close second, and Nike is often way more affordable and accessible. Plus, Nike dominates in the athletic performance market, including in the ultra-valuable women's soccer and basketball markets where Lululemon has no presence.More than being a popular brand among women, Nike is a very smart company that understands just how quickly the women's athletic apparel market is growing. That's why they are doubling down on the women's market. * 11 Stocks Under $10 to Buy Now In other words, Nike is not just naturally levered to benefit from SHEconomy expansion, but will doubly benefit from said expansion because management is focused on optimizing the women's opportunity. This combination sets the company up nicely for big revenue and profit growth over the next several years, the sum of which should power NKE stock higher. Ross Stores (ROST)Source: Andriy Blokhin / Shutterstock.com Morgan Stanley thinks the SHEconomy will create sizable tailwinds for discount retailers, and in that group, it names Ross Stores (NASDAQ:ROST) as one of its favorite stocks.I also fully agree with this pick. All consumers love a good discount. Women consumers are no different. Whether they are looking for a last minute dress, want to upgrade their wardrobe on a budget, or are looking for cute, small house decorations, female consumers are constantly finding reasons to visit Ross Stores.The bull thesis on ROST, though, is that this isn't just a girl thing. Guys love Ross, too, whether it be for a last-minute shirt, new shoes or new ties, they also are constantly finding reasons to visit Ross Stores.That's why -- amid the turbulent retail environment that has persisted for most of this decade -- Ross Stores has reported largely positive comparable sales growth with healthy margins and strong profit growth. In response, ROST stock has risen 800% -- yes, 800% -- over the past 10 years.This trend of operational and stock price out-performance will persist. As such, not only is ROST stock a great SHEconomy stock to buy, but it's also a great retail stock to buy. TJX Companies (TJX)Source: Shutterstock In the discount sector, Morgan Stanley thinks that TJX Companies (NYSE:TJX) will similarly benefit from SHEconomy tailwinds over the next several years, and I again fully agree.The bull thesis here is very similar to the bull thesis on ROST. All consumers -- female and male -- love discounts, and are constantly finding excuses to shuffle their way into discount stores like TJX and ROST. On the SHEconomy side, though, TJX has a bigger home furnishings presence than Ross Stores, and this larger home furnishings presence more broadly exposes it to SHEconomy tailwinds over the next several years.So, while I like both ROST and TJX as SHEconomy stocks to buy over the next several years, I like TJX slightly better for its broader home furnishings exposure. * The 7 Best Long-Term Stocks to Buy for 2019 and Beyond Much like ROST, TJX has reported largely positive comparable sales growth for several years, alongside healthy margins and big profit growth. This has led to strong stock price performance, with TJX stock up over 500% over the past decade. All of these dynamics will persist -- big revenue growth, big profit growth and big share price gains -- meaning TJX stock is a great stock to buy and hold for the long run. Ulta (ULTA)Source: Shutterstock What would this list be without including beauty retail giant Ulta (NASDAQ:ULTA)?Perhaps one of the more obvious choices on this list, Ulta is naturally set to benefit from SHEconomy tailwinds because what they sell -- cosmetics -- is exactly what women spend a ton of money on. Indeed, according to a Groupon survey, women spend about 25% more than men on beauty products and services.Also helping Ulta is the fact that an overwhelming majority of its consumers skew young, meaning that these are the consumers who are going to be earning incomes (and spending money) for a lot longer. Ulta seems supported by multiple favorable demographic trends, all of which seem to have long runways.Given these circumstances, Ulta looks positioned to grow revenue and profits at a fairly robust rate for the foreseeable future. At 25-times forward earnings, ULTA stock is priced for some of this growth -- but not all of it. As such, this stock has compelling multi-year upside from current levels. Chipotle (CMG)Source: Shutterstock Morgan Stanley included two restaurant stocks in its list of SHEconomy stocks to buy. The first of those restaurant stocks is Chipotle (NYSE:CMG).I get the thesis here. Consumers are increasingly obsessed with eating healthy, especially female consumers. Chipotle dominates in the restaurant overlap of healthy and affordable. As such, the company has ample exposure to SHEconomy tailwinds over the next few years and those tailwinds -- coupled with other tailwinds, like digital business expansion, new menu innovations and unique marketing campaigns -- should drive robust revenue and profit growth, the sum of which should propel CMG stock higher.That all makes sense. But, that thesis misses the biggest point about CMG stock: it is the most richly valued restaurant stock out there. The stock trades at over 60x forward earnings. That's right. With CMG stock, you have a restaurant stock trading at more than three times the S&P 500 index forward earnings multiple.Sure, bulls will argue that the premium valuation is warranted by big profit growth potential, which is powered by strong comps and a huge recovery in margins. I understand that. I also understand that analysts are modeling for ~20% EPS growth in the long run and that lines up with my modeling, too. A 60x forward earnings multiple for about 20% EPS growth just seems like too much. * 7 Internet of Things Stocks to Buy Now As such, while I get the qualitative SHEconomy bull thesis here, I don't think the numbers add up. Starbucks (SBUX)Source: Natee Meepian / Shutterstock.com The second SHEconomy restaurant stock Morgan Stanley recommends to buy is Starbucks (NASDAQ:SBUX). But, much like CMG stock, I don't agree with a "Buy" rating on SBUX stock.Here's the thing with Starbucks: They are caught between a rock and a hard place long term. Right now, they dominate the retail coffee game, and they do so at high prices. That's rare. Normally, consumer-facing markets have the market share leaders (which have big market shares because of their low prices) and the premium players (which have small market shares because of their high prices). Think groceries, with Kroger (NYSE:KR) versus Whole Foods. Or think fast food, with McDonald's (NYSE:MCD) versus Shake Shack (NYSE:SHAK).The coffee retail market is an exception to this trend. For now. Over time, it will start to look like all those other markets. Indie coffee shops will enter at premium price points and dominate the high-end of the market. Fast casual chains like McDonald's will expand their breakfast offerings and dominate the low-end of the market. In that world, where is Starbucks? Somewhere in the middle -- and I'm not convinced the middle ground will be as big as everyone seems to think it will be.As such, the current 35-times forward earnings multiple on SBUX stock seems way too high to me. I don't see this company as much more than a 10-15% profit grower in the long run. That's pretty much the market-average EPS growth rate, and the market trades at 15x, not 35x, forward earnings. Tesla (TSLA)Source: Vitaliy Karimov / Shutterstock.com Last, but not least, on Morgan Stanley's list of SHEconomy picks is premium electric vehicle manufacturer Tesla (NASDAQ:TSLA).I agree with this pick. But not for the SHEconomy demographic tailwinds. Rather, for the Generation Z demographic tailwinds. In the Generation Z demographic, the most talked about, popular, and relevant car brand is Tesla -- and it's not close. According to TotalSocial data, teens are talking about car brands less and less on social media, with one notable exception -- Tesla, whose daily social mentions rose more than 100% from 2013 to 2018.Tesla is the car brand of choice for most young consumers. That's important, because those young consumers are in the process of growing up. Soon, they'll be earning steady incomes, which will give them enough purchasing power to buy their own car. When they do that, chances are pretty high they will buy a Tesla, given their infatuation with the brand relative to other auto brands. * 7 Retail Stocks to Buy on the Dip Net net, Tesla seems poised to benefit from demographic tailwinds which will increase the company's market share in the auto market dramatically. As that happens, revenues, profits, and the stock price will all move higher in the long run.As of this writing, Luke Lango was long LULU, NKE, TJX, KR, MCD and TSLA. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks That Could See 100% Gains, If Not More * 11 Stocks Under $10 to Buy Now * 6 China Stocks to Buy on the Dip The post 8 SHEconomy Stocks Morgan Stanley Says to Buy appeared first on InvestorPlace.
The major stock indexes reversed lower early Thursday. Dow Jones stock Nike is forming a new base in today's stock market.
Dick's Sporting Goods and Nordstrom led retailers higher, and Boeing topped the Dow Jones today as attention turned toward Jackson Hole.
Stocks rallied Wednesday after President Donald Trump implied he's open to making a deal with China on trade, but gains were capped by the release of minutes from the Federal Reserve's July meeting.Source: rafapress / Shutterstock.com Those minutes revealed that some of the central bank's governors pressed for a cut of 50 basis points last month, but they were obviously out-voted as the Fed proceeded with a reduction of just 25 basis points. What put a lid on today's upside for equities were comments that the July rate cut was not necessarily a precursor for more reductions."In their discussion of the outlook for monetary policy beyond this meeting, participants generally favored an approach in which policy would be guided by incoming information and its implications for the economic outlook and that avoided any appearance of following a pre-set course," according to the Federal Open Market Committee (FOMC).InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Marijuana Stocks to Ride High on the Farm Bill Currently, Fed funds futures are pricing in another 65 basis points of rate cuts this year, indicating there is room for markets to be left disappointed by the U.S. central bank.Still, the Nasdaq Composite notched an impressive gain of 0.90% today while the S&P 500 settled higher by 0.82%. The Dow Jones Industrial Average tacked on 0.93% amid broad-based strength in the blue-chip index. In late trading, 29 of the 30 Dow stocks were higher. Dow Winners GaloreWhile the Fed minutes may have lacked the punch investors were hoping for, there were some solid earnings reports (non-Dow stocks) out of the retail sector that gave market participants reason to be the oft-discussed recession is a long way from materializing. On that note, Nike (NYSE:NKE) was the Dow's best performer today with a gain of 2.83%.Sticking with consumer cyclical fare for a moment, McDonald's (NYSE:MCD) rose 2.25% after SunTrust analyst Jake Bartlett opined that the company's current Buy One, Get One (BOGO) for $1 promotion won't be a drag on profits. He's got a "buy" rating and $240 price target on McDonald's.The analyst's "research shows that McDonald's new offer is less promotional than its two for $5 mix-and-match deal that the company has cycled through in recent years--meaning McDonald's isn't meaningfully lowering the bar on prices in a way that would force rivals to discount as well," according to Barron's.I'm not saying it's all clear to wade into the energy sector, but it is encouraging to see more positive action out of oil giants Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), both of which traded higher today on the back of some bullish analyst chatter.BMO analyst Daniel Boy said Exxon and Chevron, the two largest U.S. oil companies are the "lowest risk" names and best of breed in the energy patch. Specific to Chevron, that's the second time in a matter of days an analyst has been cheery on the company.Shares of Boeing (NYSE:BA), the Dow's largest component, added 2.49% today on news that the company is looking to fill hundreds of temporary jobs related to getting the 737 MAX passenger back in the air. Wall Street is hoping that will happen by the end of this year and if it does, Boeing shares likely move higher. DJIA Bottom LineIt's easy to get wrapped in the aforementioned Fed "disappointment," if it can really be called that. Additionally, it's easy (and warranted) to be skeptical of President Trump's comments on deals with China because recent history shows this situation is fluid.Maybe what investors should be honing in on is the likelihood of recession. Look at Target (NYSE:TGT) earnings. That stock surged over 20% today on volume that was nearly seven times the daily average because it guided higher. Companies like Target don't guide higher when recessions are right around the corner.Todd Shriber does not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Marijuana Stocks to Ride High on the Farm Bill * 8 Biotech Stocks to Watch After the Q2 Earnings Season * 7 Unusual, Growth-Oriented REITs to Buy for Your Portfolio The post Dow Jones Today: Let's Make a Deal appeared first on InvestorPlace.
Buoyed by positive gains for shares of Boeing and Nike, the Dow Jones Industrial Average is trading up Wednesday afternoon. The Dow (DJIA) was most recently trading 200 points, or 0.8%, higher, as shares of Boeing (BA) and Nike (NKE) have contributed about 25% of the index's intraday rally. Boeing's shares have climbed $7.98, or 2.4%, while those of Nike have climbed $1.80, or 2.2%, combining for a roughly 66-point boost for the Dow.
DOW UPDATE The Dow Jones Industrial Average is rallying Wednesday morning with shares of Nike and IBM delivering strong returns for the blue-chip average. Shares of Nike (NKE) and IBM (IBM) are contributing to the blue-chip gauge's intraday rally, as the Dow (DJIA) is trading 269 points higher (1.
Athletic apparel giant Nike (NYSE:NKE) was having a great 2019 until recently. Back in mid-July, NKE stock was up roughly 20% year-to-date, largely in-line the S&P 500's 20% YTD gain. Unfortunately, escalating trade war tensions in August put a damper on Nike's good year. NKE stock has since dropped 10%. The S&P 500 is down just 3% over the same time frame.Source: TY Lim / Shutterstock.com Year to date, the S&P 500 is now up 16%, while Nike stock is up just 10%.In other words, thanks to U.S. President Donald Trump upping the trade war ante in early August with the threat of new tariffs on Chinese imports, Nike stock has gone from having a good year, to having a sub-par year.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Undervalued Stocks With Breakout Potential This recent weakness in NKE stock is overstated. It won't last, and it will be replaced by a strong end-of-year rally for three big reasons.First, the fundamentals supporting Nike remain exceptionally favorable, and pave a path for NKE stock to hit $100 over the next twelve months. Second, the optics surrounding Nike and the trade war are set to materially improve into the end of 2019. Third, the technicals imply that NKE stock is on the verge of a generational buying opportunity.As such, I'm bullish on NKE stock on this recent dip. This is a winning stock trading at an attractive discount, with huge catalysts on the horizon and a chart that says a big rebound is coming soon. Nike's Fundamentals Pave a Path Towards $100The biggest reason to buy NKE stock on this recent dip is because the fundamentals remain very strong, and pave a path for huge upside in NKE stock over the next twelve months.Nike is firing on all cylinders right now, which hasn't always been the case. Back in 2015, German athletic apparel maker Adidas (OTCMKTS:ADDYY) paired up with celebrity musician Kanye West to capitalize on the athleisure trend by blending culture with sports (the partnership actually started in 2012, but 2015 was when Adidas launched the first Kanye shoe). It was a genius move. From mid-2015 to mid-2018, Adidas rattled off a streak of twelve consecutive quarters of double-digit, constant currency revenue growth.This brilliant Adidas move had a negative impact on Nike. From 2015 to 2018, Nike's constant currency revenue growth rate slowed from 14% to 4%. But, recognizing that they were losing share to Adidas, Nike launched Consumer Direct Offense in 2017, which focused on streamlining investment dollars into trend-setting metro areas, doubling down on direct sales, and accelerating the innovation pipeline.Nike has since done all three of those things. And it has worked. Adidas' constant currency growth rate has decelerated to 4% in 2019. Nike's accelerated to 11%.In other words, Nike is back. Usually, these fashion trends last several years. Fiscal 2019 was really the first year of this Nike-first trend. Thus, it increasingly appears that Nike is in the first few innings of a new above-trend growth ramp.The athletic apparel market projects to grow at a 5%-7% rate into 2025/26. Nike should grow above that rate -- probably around 7%-8%. Gross margins should trend higher due to strong consumer demand. Opex rates should fall gradually with revenue scale.That paves a viable runway towards $6.75 in EPS by fiscal 2026. Based on historically average 25-times forward multiple, that equates to a 2025 price target of nearly $170. Discounted back by 10% per year, that implies a fiscal 2020 price target of roughly $105. Trade War Optics Will Materially Improve NKE StockThe second big reason to buy the dip in NKE stock is because trade war optics -- which have killed the stock in August -- will meaningfully improve into the end of the year.My theory here is pretty simple. President Trump is all about winning the 2020 election. He knows that his odds of winning that election are highest if the U.S. economy is firing on all cylinders ahead of the election, especially since he has tied his presidency's success to stock market highs and big GDP numbers. How does Trump get that "firing on all cylinders" economy ahead of the election? He needs low rates to juice the economy.That's why he has been so adamant about the Fed cutting rates. But, in late July, the Fed disappointed by cutting rates only 25 basis points and not sounding very dovish with respect to future rate cuts. The Fed did say, though, that the U.S.-China trade war is essentially the biggest risk to the U.S. economy. Who is behind that trade war? Trump. So, in theory, all Trump has to do to get the Fed to cut rates is temporarily accelerate the trade war.He did just that -- the very day after the Fed only cut rates by 25 basis points. That's not a coincidence. Trump doesn't want these tariffs to actually materialize and meaningfully damage the U.S. economy ahead of the 2020 election. He just wants the threat of them to create enough economic cross-currents to get the Fed to cut rates, at which point he will pull the tariff threats and reduce trade tensions.The result? An economy firing on all cylinders heading into the 2020 election, supported by reduced trade tensions and juiced by low rates.Given this framework, I think it is very likely that over the next few months, trade war optics improve dramatically. As they do, stocks that are at the epicenter of the trade war, like Nike stock, will bounce back in a big way. Technicals Imply We Are on the Cusp of a Generational Buying OpportunityThe third big reason to buy the dip in NKE stock is that the technicals imply that we are on the cusp of a generational buying opportunity in Nike stock. Click to EnlargeConsider the chart. Over the past decade, NKE stock has been on a solid uptrend with a very strong multi-year support line that has held three times before. After each successful "test-and-hold" of this multi-year support line, NKE stock proceeded to rally in a big way over the subsequent several years.NKE stock is on the verge of testing this support line again. If it does, history says that a successful test of the support line will precede a big multi-year rally in the stock. Bottom Line on NKE StockNike stock has been hit hard by the trade war over the past month. This recent weakness is creating a compelling buying opportunity into a high-quality stock supported by favorable fundamentals, optics, and technicals. As such, buying the trade war dip in NKE stock this month seems like the right move.As of this writing, Luke Lango was long NKE. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Dividend Stocks to Load Up On * The 10 Biggest Losers from Q2 Earnings * 5 Dependable Dividend Stocks to Buy The post 3 Big Reasons to Buy the Dip in Nike Stock appeared first on InvestorPlace.
Foot Locker is plummeting after the retailer reported earnings and sales that mixed expectations. Yahoo Finance's Dan Roberts joins Akiko Fujita on 'The Ticker' to discuss why Morgan Stanley's claim that women staying single longer could be good news for athleisure brands.