- Nike crushed earnings expectations on Thursday afternoon, sending the stock flying more than 10%.
- Jefferies says there’s a cheaper way to play the brand’s resurgence though Foot Locker.
- Follow Nike’s stock price in real-time here.
If you missed out on catching Nike’s 11% surge following its earnings beat on Thursday, Jefferies may have another option to play the brand’s resurgence.
“We see Foot Locker as a better (and cheaper) way to play Nike, and Under Armour a great way to play industry strength,” Randal Konik, an analyst at the firm, told clients in a note Friday. “We see Foot Locker as a prime beneficiary of Nike resurgence in North America, given that the brand represents ~70% of Foot Locker’s product mix.”
While Nike, the second best performing stock in the S&P 500 this year, trades at a relatively expensive price-to-earnings ratio of 30, Foot Locker – on which Jefferies has a buy rating – trades at a much lower 12.8%.
Jefferies maintains its “hold” rating for Nike, but raised its price target to $75 – 5% below where shares were set to open Friday – ended a three-quarter streak of revenue losses in North America. Nike also said it plant to repurchase $15 billion worth of its class B shares over the next four years, beginning in 2019.
The analyst went so far as to say there wasn’t a single thing that Jefferies didn’t like in the quarter.
“We see momentum resurging in NA as Nike recaptures lost share from Adidas,” Jefferies said. “Nike’s ability to innovate is second-to-none, and it well-positions the brand to continue gaining back lost share through platforms such as the Air VaporMax, Zoom Air, and React which have seen tremendous success.”
“Our new innovation is winning with consumers, driving significant momentum in our international geographies and a return to growth in North America,” Mark Parker, Nike’s CEO, said in the earnings statement. The company also recorded revenue growth in Europe and the Middle East, with the strongest performance in China.
Shares of Nike are up 24.6% since the beginning of 2018, while Foot Locker has gained 15% in the same time period.