Is Nike Stock A Buy For Next Year?

We look at why Nike share price hiked on Friday.


Nike stock made significant gains last week as its earnings report for Q2 for fiscal 2019 impressed investors. The company saw healthy revenue growth and improved margins. The gains that Nike made were attributed to strong global sales and progress in its ecommerce department. Shareholders and analysts were surprised by the report, causing Nike stock price to hike by 7% on Friday. As a benchmark, the S&P 500 fell over 2% on the same day, which highlights just how strong Nike stock‘s increase was.

Why Did Nike Stock Increase On Friday?

What did the Q2 report show to make investors jump on Nike stock?

Strong E-Commerce Sales

Nike’s online store is the main catalyst for the increase in global sales. Although, Nike Direct also made up a significant amount of international sales.

Digital sales had increased by 41% year over year, with both “sportswear and performance” categories making gains. Even the Jordan Brand business saw growth according to Nike CEO, Mark Parker.

Whilst e-commerce sales were not enough to win investors over, margins and outlook had strong impacts on Nike stock price.

North America sales increased by 8.5% to $3.782 billion. Despite Jordan Brand performing not so well in the recent past, the business still posted double-digit growth and strong sales over the Thanksgiving weekend, which gave online sales a 30% boost.

In China, Nike continues to be a hit with consumers. Despite economic downturns and uncertainty due to the US/China trade war, Nike reassures investors that its business has not been affected. This should bring confidence to Nike shareholders because if there were further issues arising from a trade-war, the Nike share price would hold steady.

Promising Outlook

Nike’s Q2 earnings report sparks optimism for the next 12-month revenue growth outlook. Nike has said that earnings for Q2 ended in November. Earnings per share came in at 52 cents, which was higher than Wall Street estimates of 46 cents a share. Year over year, Nike earnings per share increased by 13%.

CEO Mark Parker said this about about Nike’s Q2 growth: “The growth for Q2 was exceptional and we had a great start for Q3, with the largest product launch that we’ve ever had in our history. So that’s a good signal right there”.

Parker also told investors that Nike has more potential to diversify its product range, specifically in the Woman’s apparel and footwear collections. In the report, Nike stated that it could see revenues reaching low double-digit percentage range. Gross margins increased by 70 basis points, which beat out expectations of around 50 basis points.

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