So much for Nike’s meandering. If you took advantage this summer to buy additional shares of the athletic footwear giant, first discussed here on May 12, 2009 at a price of $50.98, you made the correct move, and Nike has arced higher since.
Nike took out $80 resistance in October, and is now testing $90. Hence now may be a good time to consider taking some profits off the table with NKE.
Those investors who can tolerate the risk can hold on to their full position and go for an even bigger gain, as NKE is likely headed.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for NKE are $4.39 to $4.93.
Nike will likely post an 8-10% fiscal 2011 revenue increase, followed by a better performance in 2012, boosted by international market sales, which account for about 60% of revenue. Further, the company’s decision to tailor marketing and sales campaigns to regional markets appears to be yielding results.
Meanwhile, margins will likely remain flat, due to higher raw material and transport costs, but that’s offset somewhat by continued corporate staff rightsizing/efficiency improvements. A modest $1.24 annual dividend adds to the positive story.
Technically, as noted, Nike broke out of 4-month $66-72 trading range with authority, zooming to $90. There will be key, psychological resistance at $100, but the view from here argues the uptrend is stronger, and should prevail.
2011 Outlook: I view Nike as a long-term play, but if you’re looking to sell NKE within the year, it’s probably best to take your profits after it rises to $97-99, if it fails to clear $100.
I’d also raise the sell/stop loss to $64 from $51.
Stock Analysis: I consider Western to be a moderate-risk stock. If an investor has already purchased the company’s shares, I’d hold them. If not, I’d consider buying a 25% position in WU now; then buy another 25% in one month, if U.S. and global economic conditions don’t worsen substantially. Under any circumstance, I wouldn’t buy more than 50% of my WU position before February 2011 and I’d put a sell/stop loss at: $64.
Business Correspondent – Ed Johnson http://www.swagvest.com