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Nike Inc (NKE) Stock Could Get a Boost From LaVar Ball

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If you've never heard of LaVar Ball, it's not due to a lack of effort on his part. He's the loudmouth father of Lonzo Ball, star point guard at UCLA and likely top-five draft pick in this month's NBA draft. He also might just be the best thing to happen to Nike Inc (NYSE: NKE ) stock in a while.

Why Nike Inc (NKE) Stock Is the Real Winner of the NBA Finals

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LaVar just launched a new sneaker company called Big Baller Brand, which last month unveiled a $495 basketball shoe and $220 sandal . Combined, less than 500 pairs were sold in the first week.

That's five hundred … total. Not exactly the kind of debut that will have Nike "shaking in their boots," as LaVar boasted.

It wasn't the first time LaVar Ball has taunted or mocked Nike. And all that publicity has been great for … Nike. Soon, LaVar's 15 minutes of fame will be up and Big Baller Brand will probably go bankrupt once the market for consumers with $500 to spend on basketball shoes fails to materialize.

In the meantime, Nike's shoes are looking comparatively cheap. Most of their Air Jordan brand sneakers cost less than a third of the Baller Brand shoes.

NKE Getting Attention from LaVar

What LaVar Ball has managed to do is draw lots of attention to the entire sneaker and basketball apparel industry. And in that industry, Nike is king. Not that Nike needs the attention - the company grew profits by more than 23% in its most recent quarter, and has steadily improved sales in a 5% to 8% range in each of the last nine quarters. Analysts expect more of the same this year: 6% sales growth, 11% EPS growth.

Despite that steady growth, NKE stock has been up and down, starting the year at $50, touching as high as $58 in March, and dipping to $51 late last month. It's back up to $53 now, and has risen just under 4% for the year, or roughly half the 2017 gains in the S&P 500 Index .

But that pedestrian performance looks like an explosion when compared to the recent returns of Nike's biggest rival, Under Armour Inc (NYSE: UAA ,NYSE: UA ), whose stock has lost about a quarter of its value so far this year and nearly half its value in the past 12 months.

Nike is still cheaper than UA, trading at 21 times forward earnings estimates compared to UA's forward P/E of 39. Oh, and NKE stock pays a modest (1.4% yield) dividend, while Under Armour doesn't pay a cent. It may not be a screaming buy, but NKE is at least a stable company amid a sea of dying retail companies. And Nike stock is trending in the right direction.

Come to think of it, NKE stock is the anti-LaVar Ball: rarely volatile (with a beta of 0.40), predictable and reliable (see the years of steady sales growth), and a brand that is universally recognized and loved in part because it is affordable to the masses, not just "Big Ballers" (as LaVar refers to his Muggsy Bogues-sized customer base).

Perhaps that's why Nike - along with Under Armour and Adidas AG (ADR) (OTCMKTS: ADDYY ) - refused to endorse Lonzo Ball back in April. Nike likes predictability and certainty, and unfortunately for Lonzo, his father is neither of those things.

Buy NKE Stock at $54

Just this week, the elder Ball claimed that the reason Nike passed on his oldest son was because LaVar wanted to "co-brand" with them, not solicit an endorsement deal.

Among other things, LaVar said Nike executives "weren't ready for this change." And with that, Nike was once again in the news thanks to LaVar Ball, who may unwittingly be their best endorser not named Michael Jordan or LeBron James.

While I wouldn't hop on NKE stock just yet, if it pokes its head above its 50-day moving average ($54), that might be a good time to pounce. At the rate LaVar Ball has been talking about Nike lately, that could happen by the end of the week.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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