Trade tensions between Beijing and Washington have led to a new round of tariff’s levied against companies on both sides of the Pacific ocean.
Major companies with operations in both countries are expected to get hit the worst from these tariffs. However, one major athletics manufacturer will likely be sparred from this negative impact, easing investor fears.
In particular, analysts covering Nike (NYSE: NKE) have gone on to say that tariff’s won’t hurt the company’s upcoming fourth-quarter earnings report, which are expected to be released on Thursday after the bell.
“We support efforts to achieve better trade deals, but American consumers should be caught in the crosshairs,” said David French, senior vice president for government relations at the National Retail Federation, according to MarketWatch. “It’s time to reevaluate a strategy based solely on tariffs and work with our allies to put international pressure on China.” Analysts have gone on to add that despite the fact that much of Nike’s equipment is produced in China, it’s still a negligible part of the business. “[E]quipment encompasses less than 5% of Nike’s total North American revenue,” said one note from analyst Sam Poser from Susquehanna Financial Group. “Thus even if 100% of Nike’s equipment category in North America is imported from China into the U.S., exposure to potential tariffs is limited.”
Poser goes on to give Nike a “buy” recommendation with a target price of $100 per share. This opinion is shared by most other analysts on Wall Street, with one recent poll surveying 30 analysts giving an average “buy” rating with an average target price of $92.74 per share.
Investors are keeping a close eye out for Nike’s upcoming fourth quarter financial figures, which will hopefully address some of the concerns they have. One of these worries is whether or not growth has been stalling in domestic markets. Nike previously announced double-digit sales growth in the previous quarter. However, sales have fallen by 7 percent in the U.S., and investors are wondering whether this trend will disappear or if growth will fall even more.
Shares of Nike ended up increasing by a modest 0.6 percent on Friday in response to the news. Despite to increases in trade tensions as well as the prospect of imposed tariffs, investors have remained optimistic about Nike’s stock regardless of this risk. Over the first quarter of the year, shares of the company ended up surging from $67 to $88 per share, while the second quarter of the year has seen the stock rise and fall, staying around the $85 per share price range.
Nike Company Profile
Nike is the largest athletic footwear and apparel brand in the world. It designs, develops, and markets athletic apparel, footwear, equipment, and accessories in six major categories: running, basketball, soccer, training, sportswear, and Jordan Brand.
Footwear generates about two thirds of its sales. Nike’s brands include Nike, Jordan, Converse (casual footwear), and Hurley (action sports). Nike sells products worldwide and outsources its production to more than 400 factories in more than 40 countries. Nike was founded in 1964 is based in Beaverton, Oregon. – Warrior Trading News
