CNBC’s Jim Cramer on Monday said investors should buy on the pullback in Nike coming off of its latest earnings report.
The stock plummeted 6.6 percent on Friday after Nike reported weaker-than-expected sales growth in North America, but Cramer said he likes where the company is positioned. Despite the blip in overall sales, he noted footwear saw a 9 percent increase in North America, while footwear and apparel sales grew 20 percent in China.
“Nike only pulled back on Friday because its stock had run up dramatically going into the quarter,” the “Mad Money” host said. “But the results were great. I’m telling you they were great. I’m betting the guidance was a classic example of UPOD (under promise, over deliver), which means Nike is a buy tomorrow morning, right here.”
Cramer said the stock increased dramatically after getting slammed with the rest of the market during the fourth-quarter sell-off. Nike touched a low of about $66 in December then ran up 33 percent, peaking at about $88 last week, he said.
“While Nike’s stock ran like a champion earlier this year, the rally happened on no real news,” he said. “The stock never should’ve been down so much in the fourth quarter, so it kept levitating and levitating and levitating, as analyst after analyst upgraded Nike … just aggressively pushing the stock.”
Nike has new technology to personalize products with various designs, which helped boost sales of the Air Force 1 and Air Jordans sneakers, and bring new products to market more quickly, Carmer said citing the company’s conference call. The apparel giant also has tools to track those goods digitally to match supply to demand across the globe, he said.
“In other words, Nike’s become a tech company masquerading as a sneaker company,” Cramer said.
The ongoing trade war between the United States and China seems to have had no effect on Nike, the host highlighted. The Chinese government has been working with the apparel maker to help expand physical education programs in schools and promote health in the country, he said.
“That’s why the company can seemingly shrug off the trade war, something that’s done a lot of damage to many other U.S. brands with a lot of business in the People’s Republic,” Cramer said. “Nike doesn’t have any serious Chinese competition, which makes it perhaps the best American brand in the PRC when it comes to not worrying about somebody switching to a Chinese alternative.”
Nike’s stock climbed 0.17 percent on Monday.
Cramer said the stock at $82 is relatively inexpensive, trading at 26 times next year’s earnings estimates. Some of its top competitors in Under Armour and Lululemon are trading at 43 and 33 times earnings, respectively, he said.
Questions for Cramer?
Call Cramer: 1-800-743-CNBC
Questions, comments, suggestions for the “Mad Money” website? email@example.com