Analyst Says Buy The Dip Nike's Post-Earnings Drop

Shares of Nike Inc (NYSE: NKE) traded lower despite reporting a top- and bottom-line earnings along with a net income of $1.12 billion in its fiscal second-quarter earnings report.

Benzinga · 12/20/2019 15:05

Shares of Nike Inc (NYSE: NKE) traded lower despite reporting a top- and bottom-line earnings along with a net income of $1.12 billion in its fiscal second-quarter earnings report. Raymond James analyst Matthew McClintock offered his take as to why this happened.

'Buy The Dip' In NKE

This has become characteristic for the stock over the past few quarters, McClintock said on CNBC. Specifically, Nike showed a meaningful top-line beat as constant currency grew 13% while EPS of 70 cents beat by 13 cents. Beyond the headline numbers, every other metric matched or beat Wall Street's estimates.

"This is another one of those situations of buy the dip in Nike," the analyst said.

Encouragingly, Thursday's print is a "perfect example" of why investors shouldn't be worried about anything China or trade war related, the analyst said. Nike's gross margins were impacted by 50 basis points from tariffs yet still ended the quarter up by 20 basis points. Also, the company is seeing zero "backlash" in its China business towards its brand.

New CEO Is Coming

Nike announced in late October that John Donahoe will assume the CEO title in January and he brings a "wide range of expertise" stemming from his experience in the digital universe, McClintock said. The move comes at a time when the digital business is seeing a lot of momentum such as a growth rate of more than 100% in the Nike app in the quarter.

"Nike is trying to be forward thinking here -- thinking about how the consumer is going to shop," he said. "And they are bringing in expertise that actually can help get them there and make this transition to the future of retail."

Nike's stock traded lower by 1.6% to $99.60 per share at time of publication.

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