Nike Inc (NYSE:NKE) shares are trading higher by 1.2% to $81.75 Thursday morning after the Federal Reserve cut interest rates by 50 basis points.
Why This Matters: Rate cuts are typically designed to stimulate consumer spending by making credit more affordable, which can boost discretionary spending on items like apparel and footwear.
Nike's products are consumer discretionary goods, meaning that when consumers have more disposable income (or easier access to credit), they may be more inclined to purchase non-essential items like Nike shoes and sports gear.
With interest rate cuts, Nike as a company also faces lower borrowing costs, improving its overall cost structure. This reduction in financial expenses could increase profitability, making the stock more attractive to investors.
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What Else: Nike operates in many markets around the world. A more aggressive stance from the Federal Reserve on rate cuts suggests a more supportive macroeconomic environment, which could spur growth not only in the U.S. but also in global markets.
If central banks worldwide follow a similar easing path, the global consumer base for Nike may increase spending, particularly in emerging markets where credit is becoming more accessible.
Read Also: Wall Street Ramps Up Interest Rate Cut Bets After Fed Meeting: 'The Hard-Landing Crowd Should Disperse,' Economist Says
Is NKE A Good Stock To Buy?
When deciding whether to buy a stock, there are some key fundamentals investors may want to consider. One of these factors is revenue growth. Buying a stock is essentially a bet that the business will continue to grow and generate profits in the future.
Nike (NYSE:NKE) has reported average annual revenue growth of 8.47% over the past 5 years. .
It's also important to pay attention to valuation when deciding whether to buy a stock. Nike has a forward P/E ratio of 26.18. This means investors are paying $26.18 for each dollar of expected earnings in the future. The average forward P/E ratio of Nike's peers is 17.58.
Other important metrics to look at include a company's profitability, balance sheet, performance relative to a benchmark index and valuation compared to peers. For in-depth analysis tools and important financial data, check out Benzinga PRO.
NKE has a 52-week high of $123.39 and a 52-week low of $70.75.
