Buy, Sell or Hold - Nike, Nio and Starbucks (Episode 17)

Welcome to The MarketBeat Podcast. I'm your host, Kate Stalter. And in this show, we cut through the noise and give you real market insights from professional investors, traders, asset managers, and analysts, our guests put the market developments in context and give you actionable information to make you a more successful trader or investor let's get started

Today. We're welcoming back a regular guest MarketBeat contributor. Chris mark Hutch, who is bringing us his insights into a couple of large cap, well known brand names and a Chinese stock in a red hot industry. And Chris will give us the low down on what are the prospects for all of these. Now, one thing that I was reminded of in talking to Chris today, one of the things I learned in my business school classes that still applies is the power of a recognizable brand. Now all these big companies that we all know their names, they have to manage their growth well, and they have to always adapt to changing market conditions. One company we discussed today is facing some unionization votes and is also raising prices to accommodate for higher input costs. That's resulting in some bad press. This company actually gets a lot of bad press, but it's still pretty popular and the stock is correcting, but do those factors mean there's a lengthy downturn ahead for this stock.

Now I personally doubt it and that is something Chris and I discussed today. Generally, despite all the dire predictions, these large brands can manage their way out of changing market conditions and out of bad press, you know, it's just bad press. It's the revenue and earnings that count, right? But I do have an example of a company that could not manage its way out of changing market conditions. And this goes back in time, remember Eastman Kodak. My dad worked there for 31 years and this was a company whose management never acknowledged the Dawn of the digital era. And it clung stubbornly to the notion that film was superior quality and would never be replaced by digital. It was the company's party line, and we all know what happened. So today, Chris and I will talk about some well known big caps with established businesses and what's happening with their stocks. Then we also throw in some discussion of a Chinese electric vehicle maker that has a large and growing brand in its home country, which is expanding into Europe. Yes, there are other EV makers besides Tesla. So as always, Chris gives us some terrific insights into these stocks, their fundamentals and their business case, and the stories behind these companies. Here's my interview with MarketBeats, Chris maroch

All right, Chris, this week with first quarter earning season getting underway, we're seeing the spotlight on large caps and we're prominent companies, and that does tend to happen during earning season. And one thing that you have been seeing is some of these well known premium brands that may have some competitive advantage, and perhaps in your view deserve a premium valuation, even with inflation, rising as fast as it is. Would you agree with that?

Yeah. I could see that there on the chart. And one thing I also noticed on the chart is there was a negative moving average crossover with the 50 day line is currently below the 200 day way.

But there's also at the same time, this is a tricky one. Chris, there's also some indications of this being a growth stock with having a PE ratio of 36. So what the heck is going on? This one has the panel stumped. ,

Right? It's often the case that some of these brand names just by virtue of who they are and their strength in the marketplace and being so well known, they can grow revenue even when that's not expected to happen.

Yeah. That's a very good point. Now say something about some of the price targets on this one, cuz isn't that also something that you've been looking at Chris,

Yeah. That's a pretty bold prediction given that Nike is 25% off its high right now. Right.

Now, one thing that you had mentioned to me earlier, you had seen some similarities between the performance of Lulu lemon, another premium clothing brand smaller company, of course, and Nike, although Lulu is the better price performer at the moment, but what are you seeing there?

What it does. Yeah. Right. That's

I see that too. Yeah. Yeah. Well, I'm looking at the, it has the same negative moving average crossover. There are quite a few, I wonder if that's something just that sometimes you see stocks in the same sector or the same industry perform in similar fashion. I wonder if there's something to the athletic clothing, sub-industry that it's all behaving the same way. I don't know.

Agree.

Yeah. And that's a good lesson for the listeners. I have always been an advocate of looking at the entire industry, if not the entire sector and seeing how the stock you are looking at is performing relative to the broad industry. And that's fine if you're looking at a stock that's maybe in favor what it's industry peers or not, but you have to know that and understand is the broad industry out of favor. And could that ultimately affect the stock that you're looking at. Right. Okay. We got another one here, another big name that everybody knows that's right. That's right. And that's been in the news lately as well seems that this one's always in the news, which tell us about Starbucks, Chris.

It usually isn't when it comes to Starbucks, it usually is not all good, actually just my opinion

Right. And you would think that their input costs are rising across the board. Right?

And we don't know, that's a tough one to predict, right? Because a lot of times analysts will come in and say, oh, this will just destroy profitability. And sometimes the things you expect do not ever pan out. So we don't

Starbucks that's right. As a trader or investor, you need timely information to help you make better decisions and analyst upgrades and downgrades can give you the outlook for the stocks. You're watching, coming from the big institutions who are behind 75 to 80% of market movements for absolutely no cost MarketBeat will send analyst recommendations, right to your inbox daily, you will get a concise summary of analyst, upgrades, downgrades, and new coverage along with relevant news and information for the stocks on your watch list. Real time portfolio monitoring tools, a rundown of the top headlines each day, market calendars, the MarketBeat mobile app and other research tools don't miss out on this sign up right now, it's a hundred percent free. You'll find this at marketbeat.com/ratings/newsletter. That's marketbeat.com/ratings/newsletter. And that link will be in the show notes. You know, it's so interesting to me because I think Instagram is sort of pro Starbucks.

Twitter is against Starbucks, but you know, I was thinking about this when we were gonna talk about this stock. Starbucks is really a habit for a lot of people. It's a treat for a lot of people. And I know personally, if I'm away from home and I don't know perhaps what a local coffee shop is like, I know what I'm gonna get at Starbucks. Right. And I'm gonna gravitate towards that if I'm in some city that I don't know, because I know exactly what I'm going to get, apologies to the always by local crowd, but not all coffee shops are very good. Sorry to say, and you know what you're getting with Starbucks. So I think that's an element.

Yeah, that's interesting. And I wanna take this opportunity to remind the listeners. You can find price targets and analyst upgrades and downgrades at MarketBeat. There's plenty of information right there. If you wanna see what the professional investors, what the analysts are saying about the stocks, it's all there@marketbeat.com. You can easily find that. Just wanted to put in that little plug cause it's a great collection. Mm-hmm of data that you can find for free all in one place. So little plug for MarketBeat right there, Chris . So last one we had today that we wanted to talk about, okay, is an EV stock electric vehicles. And I had read this morning in the New York times, something interesting that despite rising gas prices, it's not resulting in a boom in sales for EVs, which is what a lot of people intuitively had expected. Now you're looking at Neo, which is a Chinese EV maker had a fantastic year in 2020, but it seems the slower growth theme is applying to Neo as well. Isn't it?

Kind of the razors and razor blade model. Similar to that.

Right. That would be a tough barrier to entry. I would think

Well, let me jump in, this is an interesting one because I'm looking at this right now and it is true that revenue growth has slowed in the past three quarters, right after really jumping in 2020 and 20, let's see kind of early 20, 21, March, 2021. They had a banner quarter in terms of revenue with more than 500% growth year over year. But then the year over year growth has been slowing and there's yet to be any profitability here and Chris for this year and next year, at least analysts don't expect the company to be profitable, which I understand if they're putting a lot more money into launching products, expanding into Europe and that kind of thing, that makes sense. But it's still something to perhaps some investors myself included might be a little bit nervous about is to see a company that is not yet profitable. What do you think about that?

Right? Which presents extra

Yeah. Who knows

Good point. Yeah. I mean, my take on this one, Chris, is I agree with you. It's interesting. Mm-hmm but it may be as the old saying goes, not quite ready for prime time, but I will definitely put a link to Sam's article in the show notes because I agree with you. It is definitely worth watching and learning about what this company is, right? Yeah. Hey, thanks so much. You've given us some great ideas today as always appreciate you joining the show because you always come up here with some great food for thought and some great ideas to discuss. And I really appreciate that and I'm sure the listeners do as well. How can the listeners find you? I know it's the same every week, but in case this is the first time that somebody's listening to one of your interviews. Let's let 'em know how to find you.

Right. Thanks again, Chris. Appreciate you as always.

All right. That's a wrap on this week's episode. Thank you so much for listening. Don't forget to subscribe. So you don't miss a single episode. You'll find the show on all your favorite podcast apps, Spotify, Stitcher, Google, Apple Podcasts, of course, anywhere else you get your Podcasts and you can always find us on marketbeat.com. And please, if you're enjoying the timely market insights, we're bringing you each week and finding them valuable. Please give the show a five star rating on Apple Podcasts that will help others find the show so we can bring these investing ideas to an even wider audience.