BY MARK SEBASTIAN
April 13, 2024
Each week, my team will give an overview of a stock. I’ll discuss fundamentals, Licia will analyze the charts, and AG will break down the volatility.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Trader,
Licia is out this week but will send her analysis for Monday’s ticker highlight show. This week we are breaking down Nike (NKE).
Nike Inc (Ticker: NKE)
TRADE IDEA
Hats off to the Bank of America Retail analyst. Nike popped on Thursday because bank of America upgraded the stock…for once…when a stock was not at highs but when a stock was in the doldrums.
NKE has had a really rough go the last 4 months:
Since December NKE is down 25%.
And its not like the numbers say this stock is a screaming buy…despite the sell off the PE on NKE is 26.18 on a trailing 12 month basis.
To put things in perspective. Abercrombie and Firch which has been executing flawlessly over the last year has a PE of 18.55…GPS has a PE of 17.42…TGT 19.19…JWN 25.30
By the current PE metric NKE is still expensive. Debt and Cash are not an issue and I like that the company pays a dividend.
Take a look at the performance of Foot Locker over the last year:
If this is the market for shoes…NKE still has problems.
The thing they have going for them is the Jordan Brand (full disclosure I grew up watching the Jordan Bulls).
My older son has 2 pairs for Jordan 1s and when I see his friends they all are wearing them.
I think the Jordan brand piece got a little overdone leading to the price of 120…that said there is growth there and in a year I think the PE will merrit the price.
I would be a buyer down here.
-Mark
THERE AIN’T NO “AIR” IN THE OPTION PRICES FOR NKE
NKE is a storied franchise for sure with MJ and Tiger bringing the brand to storied heights. Tiger left, MJ has become a mega billionaire so the brand could use some hotter news of late in business that is fashion oriented. There is no greater sports marketing machine than NKE. So the stock can …pop.
Caitlin Clark shoes anyone?
From a pure volatility point of view options are very cheap here. NKE is too big and too expensive a company to take private so upside call calendars might work here or even call diagonals.
52 week lows in volatility is a low spot. Cheap options need to be bought but also they need to get financed. There is a long time between earnings and a stock like NKE lives on news. I like the bottom fishing ideas from Mark but would use call calendars or diagonals. Low IV is low movement expectations so positive theta is the way to go here.
1 year IV for 30, 60 and 90 days
If you see some back month volatility buying, NKE could be setting up for a pop.
-AG
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Questions about anything? Leave a comment below!
Mark Sebastian
Founder & CEO, Option Pit
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