NEW DIRECTIONAL CALL PLAYS
Nike, Inc. - NKE - close: 79.92 change: +1.10
Stop Loss: 77.95
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.8 million
Entry on September -- at $---.--
Listed on September 04, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
Nike made headlines earlier this week when there was a bit of a bidding war for NBA star Kevin Durant. Durant's endorsement contract with NKE was coming to an end and rival Under Armour (UA) was trying to steal Durant away from NKE with a $200 million deal. In the end NKE outbid its rival and offered the 25-year old Durant a $300 million deal over the next ten years. Some of suggested that it could be worth a total of $350 million over the next 20 years. While I personally find numbers like these outrageous it's pocket change for NKE, which is sitting on $5.14 billion in cash and brings in a net profit of $2.7 billion a year on revenues of almost $28 billion annually.
Meanwhile the winds of fashion seem to be blowing in NKE's favor. There's a new trend being called "athleisure" where activewear and fashion intersect. Last year apparel sales fell -1%. Yet sales of activewear rose +7%. The activewear market now accounts for 16% of the U.S. market and has grown to almost $34 billion.
NKE's most recent earnings report was better than expected. Wall Street was looking for a profit of $0.75 on revenues of $7.34 billion. The company beat estimates with $0.78 on revenues of $7.42 billion. Gross margins improved 170 basis points to 45.6 percent. Management reported that they spent $912 million on buying back 12.3 million shares of stock last quarter as part of their $8 billion stock buyback program.
Technically shares of NKE have been stuck under major resistance at the $80.00 level since December 2013. Investors have been slowing buying the dips and now the stock looks poised to breakout past resistance. The point & figure chart is bullish and currently forecasting at $98 target.
Tonight I'm suggesting a trigger to buy calls at $80.50. Shares of NKE do not move super fast so we'll use the 2015 January calls.
Trigger @ $80.50
- Suggested Positions -
Buy the 2015 Jan $85 call (NKE150117C85) current ask $1.81
Option Format: symbol-year-month-day-call-strike