Nike (NKE) Offering Possible 16.55% Return Over the Next 6 Calendar Days

Nike's most recent trend suggests a bullish bias. One trading opportunity on Nike is a Bull Put Spread using a strike $75.50 short put and a strike $70.50 long put offers a potential 16.55% return on risk over the next 6 calendar days. Maximum profit would be generated if the Bull Put Spread were to expire worthless, which would occur if the stock were above $75.50 by expiration. The full premium credit of $0.71 would be kept by the premium seller. The risk of $4.29 would be incurred if the stock dropped below the $70.50 long put strike price.

The 5-day moving average is moving up which suggests that the short-term momentum for Nike is bullish and the probability of a rise in share price is higher if the stock starts trending.

The 20-day moving average is moving up which suggests that the medium-term momentum for Nike is bullish.

The RSI indicator is at 66.25 level which suggests that the stock is neither overbought nor oversold at this time.

To learn how to execute such a strategy while accounting for risk and reward in the context of smart portfolio management, and see how to trade live with a successful professional trader, view more here


PRESS DIGEST- New York Times business news – Jan 11
Fri, 11 Jan 2019 06:32:35 +0000
The following are the top stories on the New York Times business pages. Reuters has not verified these stories and does not vouch for their accuracy. – European authorities are investigating whether the …

[$$] Nike’s Dutch Tax Deals Under Scrutiny in Europe
Fri, 11 Jan 2019 00:23:05 +0000
BRUSSELS—The European Commission on Thursday opened an investigation into Nike Inc.’s tax deals with the Netherlands, a move that could potentially force the U.S. company to pay back millions of euros. The companies develop, market and record the sales of Nike and Converse products, respectively, in Europe, the Middle East and Africa.

The Bull Thesis on Foot Locker Stock Is Gaining Momentum
Thu, 10 Jan 2019 20:28:32 +0000
I've been a Foot Locker (NYSE:FL) bull for a long time. When FL stock plunged in 2017 on fears that the company was being squeezed out by e-commerce and direct-retail competition, I sounded the bull horn, calling such fears premature and overstated given Foot Locker's strong, premium brand positioning among consumers. Since then, FL stock has rallied over 40%, while the S&P 500 has been flat during that same stretch.

More recently, I wrote that FL stock could rise further due to the renewed strength of Nike (NYSE:NKE). My thesis was simple. About 70% of Foot Locker's merchandise is made by Nike, and NKE is on fire right now and is forecast to remain on fire for the foreseeable future.

Moreover, Foot Locker stock is dirt-cheap, and does not reflect expectations for the better-than-expected results it will probably report due to the Nike rebound. Consequently,Foot Locker stock has room to rise.

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### Two Upgrades of FL Stock

This bull thesis is starting to gain mainstream momentum. Over the past month, two major Wall Street firms (Jefferies and Baird) have upgraded Foot Locker stock based on the shares' discounted valuation and the Nike catalyst. Not coincidentally, FL stock has rallied more than 20% over the past few weeks in the wake of these upgrades.

This rally has legs. Foot Locker's fundamentals imply that Foot Locker stock can exceed $60 in the near future, and the retailer's next earnings report could be the catalyst that gets the shares to that level.

All in all, FL stock looks good here and now. As the Nike-based bull thesis gains momentum over the next several weeks and months, FL stock should rally in a big way due to its discounted valuation.

### All About Nike

When it comes to the near-term bull thesis on Foot Locker stock, it all comes back to Nike.

Nike is simply on fire right now. There's no other way of putting it. Two weeks prior to Apple's (NASDAQ:AAPL) warning about dramatically slowing growth in China, Nike said that its China business was not only growing at a 30%-plus rate, but that it was also growing at its fastest rate in several years. In other words, even as China's economy slows, Nike's numbers there are getting better.

That's how hot Nike is right now. Its business is accelerating everywhere. Its sales growth in North America accelerated from 6% in Q1 to 9% in Q2. The sales growth of its Europe, Middle East, and Africa region surged from 9% to 14%, while its growth in the Asia-Pacific region inched up from 14% to 15%. In broad and simple terms, Nike is firing on all cylinders across all geographies.

That's excellent news for Foot Locker. For all intents and purposes, Foot Locker is Nike's footwear retailer. Roughly 70% of the company's merchandise comes from Nike. Thus, as goes Nike, so goes Foot Locker.

Not surprisingly, then, as Nike has re-emerged as the hottest brand in the athletic-apparel space, Foot Locker's results have meaningfully improved. Following a multi-quarter streak of negative comparable sales growth, Foot Locker has now recorded two consecutive quarters of positive comps, including a near- 3% comp last quarter. The company's overall revenue growth has also stabilized, while its gross margins have gone from compressing over the past few years to expanding over the past two quarters.

This trend will persist. Nike's most recent quarterly numbers ,reported in December , were very good. Since then, data research firms have reported that the 2018 holiday shopping season set records. As a result, it seems very likely that Foot Locker had a tremendous holiday quarter, supported by a red-hot Nike against the backdrop of a red-hot retail scene.

Foot Locker's holiday earnings are due in roughly two months. Those earnings will be very good and will provide the necessary firepower to shoot Foot Locker stock above $60.

### The Valuation of FL Stock Implies Healthy Upside

FL stock has room to rise on better-than-expected numbers because the valuation of Foot Locker stock is anemic and doesn't price in any good news.

At its current levels, FL stock trades at just over 11 times its forward earnings. That's a low multiple. It is below the stock market's average forward multiple of 14. It is also well below the apparel retailers' average forward multiple of 16 and the footwear sector's average forward multiple of over 20. Most importantly, it is below Foot Locker's five-year average forward multiple of 13. Thus, the multiple of FL stock can rise meaningfully.

In the big picture, Foot Locker is a leading retailer with staying power in an active-wear industry that is growing at a steady and stable mid-single-digit-percentage rate. Foot Locker may lose some share in that industry given its direct-retail competition. But its revenue growth should still stabilize at around 1%-2% per year over the next several years. Adding in gross-margin expansion and some cost leverage, its earnings per share should reach roughly $7 by fiscal 2023.

Placing FL's historical average forward multiple of 13 on EPS of $7 equates to a fiscal 2022 price target of $91. After discounting back by 10% per year, we generate a fiscal 2018 price target of $62. FL stock should head towards that level after FL reports its holiday results.

### The Bottom Line on FL Stock

The bull thesis on Foot Locker stock is starting to gain mainstream momentum. As it does, FL stock will continue to rise due to improved sentiment, better-than-expected earnings, and multiple expansion. This combination will drive the stock above $60 within the next few months and even higher thereafter.

As of this writing, Luke Lango was long FL, NKE, and AAPL.

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Nike's Dutch tax status investigated by EU regulators
Thu, 10 Jan 2019 13:20:02 +0000
The European Commission has opened an investigation into the tax treatment of Nike Inc (NKE.N) in the Netherlands, saying this may have given the U.S. sportswear maker an illegal advantage. The Nike case, announced on Thursday, follows other probes by the EU executive since 2013 into tax schemes in Belgium, Gibraltar, Luxembourg, Ireland and the Netherlands it says allow companies to establish structures to reduce their taxes unfairly. The Commission said in a statement that Dutch authorities had issued five tax rulings from 2006 to 2015, two of which are still in force, endorsing a method to calculate the royalty payments to two Nike entities based in the Netherlands.

Nike’s Rating: Upgrade from HSBC, Downgrade from Baird
Thu, 10 Jan 2019 13:03:57 +0000
On January 9, HSBC upgraded Nike (NKE) to “buy” from “hold.” The target price increased to $95.00 from $92.00. However, Baird lowered its rating for Nike to “neutral” from “outperform.” The stock fell marginally (0.2%) and closed trading at $76.59. So far in January, Nike stock has gained 3.3% as of January 9. In 2018, the stock gained 18.5%.

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