(Nike didn't hesitate to capitalize on the Cavaliers' victory, releasing this commercial following game)
Analysts at Piper Jaffray and Buckingham Research are bullish on both Nike (NKE) and Under Armour (UA) Monday morning, following the exciting and improbable conclusion of the 2016 NBA Finals on Sunday.
Nike is celebrating its top endorser's latest world title by re-releasing the shoes LeBron James wore in the final four games of this year's comeback championship. James wore the Nike Zoom LeBron Soldier 10 iD while bringing the Cleveland Cavaliers back from a 3-1 series deficit to beat the Golden State Warriors -- the team with the single-season record for wins.
The move is shrewd and represents what makes Nike such an attractive company. James' shoes are currently up to their 13th iteration, but Nike has a limitless backlog of popular shoes that bear his name that it can re-sell whenever the inspiration hits.
After James switched from his current LeBron 13 shoes to the Soldier 10 iDs, the champoinship series MVP averaged more than 34 points, 12 rebounds and 9 assists per game. More than 20 million viewers tuned in to watch LeBron clinch his third title, wearing his signature shoes.
(Nike Zoom LeBron Soldier 10 iD)
Nike shares are down about 14% year to date, but the stock was up 2.4% to about $55 in morning trading on Monday.
Analysts at Piper Jaffray sat up and took notice in a note Monday, saying that the firm remained "constructive" on Nike's shares heading into the release of the company's fourth-quarter earnings results on June 28. That is in spite of admitted headwinds caused by declining investor sentiment.
"Investor concerns range from a perceived slow-down in North America, consolidation in the sporting goods channel, Signature basketball softness and domestic footwear ASPs. We believe these concerns are over-blown," Piper Jaffray analyst Erinn E. Murphy wrote. "While inventory in the channel domestically had been elevated, we believe it is in better shape currently. We expect management to reiterate its FY17 guidance of low-teens EPS, which is [second half]-weighted in nature given spending around the Olympics."
For technical analysis of Nike and Under Armour, get chartist Bruce Kamich's take:
As a result, the firm believes that there is slight upside potential to its $0.44 per share earnings expectations for the quarter -- Wall Street has a consensus $0.48 per share expectation from Nike this quarter.
They say there is no such thing as bad publicity, and despite Golden State star Steph Curry and Under Armour's (UA) loss last night, the same 20 million-plus viewers who watched LeBron win also saw Curry's shoes on full display.
Today, shares of Growth Seeker holding Under Armour were up more than 3% on heavy volume. Analysts at Buckingham Research took the opportunity to upgrade Under Armour to Buy from Neutral while raising its price target to $48 from $44.
The firm views Under Armour's risk/reward scale as positively skewed. As pricing stabilizes in the fiscal fourth quarter, margins are expected to improve, setting the company up for a 2017 earnings upside.
If these trends continue, the only loser from the 2016 NBA Finals will be the Golden State Warriors. LeBron's sneakers could experience the post-finals bump Curry's shoes experienced last year after his team won the title. Meanwhile, the extra exposure for Curry, despite the loss, can't hurt either.