Dow Jones News: Apple Holiday Sales Seen as Strong; Nike Upgraded to Buy

The Dow Jones Industrial Average (DJINDICES: ^DJI) was up just 0.06% on Thursday by 2:30 p.m. EST. With no major news regarding the trade war between the U.S. and China, the stock market struggled to move strongly in either direction.

At the top of the pack were Apple (NASDAQ: AAPL) and Nike (NYSE: NKE), both rising thanks to positive comments from analysts. Apple was up after an analyst predicted a strong holiday quarter for the tech giant, while Nike rose after receiving a buy rating.

A merry Christmas for Apple?

While Apple’s iPhone business has stagnated in terms of units sold over the past few years, Citi analyst Jim Suva expects the company to outperform expectations this holiday season. Suva sees Apple’s pricing strategy and recent demand trends driving an improved Christmas quarter.

Suva boosted his price target from $250 to $300, and he reiterated a buy rating on the stock. Shares of Apple were up 1.4% on the positive analyst commentary.

Image source: Apple.

In addition to being optimistic about the iPhone 11 family, Suva sees the Apple Watch, AirPods, and services as key growth drivers this holiday season. Reports emerged last week that Apple had asked suppliers to ramp up AirPods production, particularly for the high-end AirPods Pro.

While Suva expects Apple’s revenue and earnings to outperform expectations in the holiday quarter, he’s less optimistic about the valuation becoming any richer. Apple currently trades at around 22 times trailing-12-month earnings after a big rally this year.

Suva sees Apple producing fiscal first-quarter revenue of $89.5 billion and earnings of $4.58 per share. Both estimates are above the consensus of $87.9 billion and $4.51, respectively.

With Apple’s price-to-earnings ratio at a multiyear high, the company will need to deliver this holiday season to keep the stock afloat.

Nike scores a buy rating

Apple isn’t the only stock getting some love from analysts. Shares of Nike were up 1.9% after Goldman Sachs added the stock to its Conviction List. Goldman upgraded Nike shares from hold to buy, calling the footwear and apparel giant “a unique asset.”

Goldman cited Nike’s strong brand and a disruptive and innovative strategy as key catalysts that will drive growth, margin expansion, and improved returns on investment capital. China is viewed as a major growth driver, with Goldman expecting Nike to grow sales at a high-teens percentage in the country. The direct-to-consumer segment will account for 50% of revenue in China by 2023, according to Goldman’s estimates.

Nike’s recent results have been solid. Revenue in the fiscal first quarter grew 7% to $10.7 billion, and earnings per share jumped 28% to $0.86. Both figures easily beat analyst expectations. Sales in China were strong, up 27% year over year. Nike’s sales in China have increased by a double-digit percentage every quarter for more than five years.

Including Thursday’s surge, shares of Nike are now up about 29% year to date.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Nike. The Motley Fool has a disclosure policy.

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