June 29, 2022- NIKE, Inc. (NYSE:NKE) and Spirit Airlines, Inc. (NYSE:SAVE)
A recent earnings beat from this apparel giant and the potential takeover of this discount airline has these two looking like the best stocks to buy now.
As stocks continue weighing on economic concerns, NIKE, Inc. (NYSE:NKE) and Spirit Airlines, Inc. (NYSE:SAVE) were two of the day’s most prominent newsmakers. Undeniably, these two could be two of the best stocks to buy now.
First, Nike reported earnings and beat on the top and bottom lines. While conventional wisdom would tell you that its earnings would disappoint because of obvious ongoing challenges, NKE proved too big to fail. Its underlying fundamentals and post-earnings price target from Jeffries also point to a 40+% upside.
Then there’s Spirit Airlines, which is in the middle of a bidding war between Frontier Air and JetBlue. As it stands alone, it would be hard to consider Spirit one of the best stocks to buy now. It’s heavily in debt, and if you’ve ever flown it, you would probably think twice of doing so again. However, the sheer aggressiveness that JetBlue is displaying in acquiring the low-cost carrier speaks volumes. After all, it told Spirit shareholders to vote no to Frontier and accept its offer, which values Spirit with a 50+% upside.
We all know what the Twitter stock did immediately following news of Elon Musk’s potential acquisition at a significant premium.
So without further ado, here is why Nike and Spirit are two of the best stocks to buy now.
NIKE, Inc. (NYSE:NKE)
Resilient earnings and a recent price target have this apparel giant staring at a 40.27% upside.
Supply chain woes, high inventory levels, and inflation could rightfully concern investors from going anywhere near apparel giant Nike.
However, this is a Company that, throughout history, has proven itself as too big to fail. It remains the world’s largest supplier of athletic shoes and apparel. It is the world’s most valuable brand among sports businesses.
NKE sits as one of our best stocks to buy now for several reasons, and it starts with the impressive earnings report it just released.
Despite Slowdowns in China and the Same Economic Woes As Everyone, Nike Easily Crushed Earnings
Analysts were rightfully concerned about a slowdown in Chinese sales, supply chain backlogs, inflation, and widespread economic issues. Yet Nike didn’t get the memo. It easily beat bottom and top-line estimates in its Q4 2022 earnings report.
After the market closed on June 27, 2022, Nike reported $0.90 EPS compared to forecasts of $0.82, while revenue came in at $12.2B compared to $12.1B estimates. Management was sure to highlight its direct-to-consumer business line’s 7% revenue increase.
Footwear revenue also came in at $7.99 billion, ahead of the estimated $7.77 billion. Furthermore, equipment revenue came in at $387 million versus the estimated $371.6 million.
China’s retail sales did fall 19%, primarily due to a 39% collapse in apparel sales amid some of the world’s most severe COVID lockdowns. However, these figures were surprisingly seen as positive and nowhere near as bad as expected.
Moreover, the Company authorized a $188 billion share buyback program, which could eventually bolster the stock.
A Perfect Piotroski Score and Outstanding Margins
Its nearly flawless fundamentals prove that Nike is one of the best stocks to buy now.
The earnings it just reported shouldn’t come as much of a surprise, considering that NKE has a perfect 9 out of 9 Piotroski Score. This means it scored perfectly concerning healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Yet, a deeper dive into its margins depicts a Company that may be even stronger than its latest earnings indicate. As a prominent player in the textiles, apparel & luxury goods industry, Nike makes the most of its assets, equity, profits, and operating income.
Consider the following margins.
Strong Dividend Consistency Helps Its Case, Too
Nike’s 1.1% dividend yield is better than nothing. But, its growth history and potential to increase more make it all the more attractive. Nike has hiked its dividend for 20 consecutive years, roughly 900% higher than the sector median. Projections also reveal potential dividend growth of 10.9% at a 5-year CAGR of 11.4%.
Despite Underlying Strength, Nike is at a Deep Discount Near 52-Week Lows
Nike is a giant in its field, trading at an incredible bargain. It’s currently trading near 52-week lows and -35.05% below 2022 highs.
Although Nike trades with a relatively high price-to-book ratio, its 0.38 PEG ratio points to deep potential value relative to projected growth.
NKE’s Latest Price Target Offers a 40.27% Upside
Jefferies Financial Group set a $155.00 price target following Nike’s earnings. That represents a 40.27% upside from NKE’s $110.50 closing price on June 27, 2022.
In total, 23 Wall Street analysts over the last 3 months offered a 12-month price target for NKE. Its street-high forecast is $168.00, while its low is $106.00, and the average is $139.24. Its average price represents a 26.01% upside from $110.50.
NKE’s year-to-date low and high are $103.46 and $170.12, respectively.
Spirit Airlines, Inc. (NYSE:SAVE)
A looming takeover has this discount airline trading with a potential 51.31% upside.
If you’ve ever flown Spirit Airlines, you’re probably thinking, “I wouldn’t touch that stock with a 10-foot pole.” It’s a low-cost carrier, and the definition of you get what you pay for.
On the surface, this isn’t a stock for fundamental investors or growth investors. It operates with a significant debt burden and is an unpredictable and volatile stock.
However, we’re not saying that Spirit Airlines is one of the best stocks to buy now because it’s such a great company. We’re saying that Spirit Airlines is one of the best stocks to buy now because of a looming takeover from JetBlue.
A JetBlue Takeover Spells Over 50+% Of Upside
Spirit Airlines is currently in the midst of the final stretch in a bidding war between JetBlue and Frontier Air.
Both bidders see Spirit as a vehicle to expand their domestic operations. With the U.S. airline industry bogged down by labor shortages, a lack of aircraft, and post-COVID pains, either of the potential acquisitions would create the fifth-largest airline in the U.S.
Frontier raised its bid for Spirit on Friday (June 24, 2022), and Spirit shareholders will vote on the deal on June 30, 2022.
JetBlue, however, is not giving up. They began the week by upping their offer. Under the new proposal, JetBlue offered a “ticking fee.” Spirit shareholders would receive a monthly prepayment of 10 cents per share between January 2023 and the deal’s closing. This would raise the deal’s overall value to $34.15 per share.
Spirit, on June 27, 2022, closed at $22.57 a share. So with JetBlue willing to pay this kind of premium for the Company, that would give shareholders a potential upside of 51.31%.
JetBlue isn’t being quiet either. It wants this deal badly as it loudly and brashly urged Spirit shareholders to vote against the Frontier deal.
The Spirit Airlines Stock is NOT as Bad as its Customer Service?
Even without a JetBlue acquisition, Spirit Airlines has some things to like. It’s a stock that can rapidly rally and give investors quick gains. While it does see peaks and valleys, the profits can be outstanding when you get in at the right time. For example, since hitting a 3-month low of $15.92 in early May, the stock has rallied 41.77% to June 27, 2022’s close.
Based on JetBlue’s offer and several multiples, it’s clear this stock remains at a very deep discount. It trades with 1.3x price-to-book, 0.7x trailing price-to-sales, and 0.5x forward price-to-sales.
Several Technicals Signal a BUY, Too
The stock is trading at an attractive discount, and the technicals are also starting to form BUY signals. According to BarChart, the stock is a BUY based on its
- 20-Day Moving Average
- 20-50 Day MACD Oscillator
- 50-Day Moving Average
- 100-Day Moving Average
- 150-Day Moving Average
Analysts See Similar Upside for Spirit
6 Wall Street analysts in total, over the last 3 months, offered a 12-month price target for SAVE at a high of $30.00, a low of $22.00, and an average of $26.50. The average represents a 17.41% upside from June 27, 2022’s $22.57 close. While this pales in comparison to the upside that JetBlue sees, it still represents considerable potential.
SAVE’s year-to-date low and high are $15.92 and $28.30, respectively.