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In a new report, Morgan Stanley calls athletic footwear “the trend to play” during Q2 earnings season. Analyst Jay Sole suggests two pair trades in the space that the firm believes will allow traders to capture outperformance while limiting overall risk.
Strong trends
According to the report, recent data and store checks have indicated that trends in athletic footwear sales have continued to get stronger. Sole believes this data is an indication that athletic footwear stocks might catch the market by surprise this earnings season, as apparel sales have been lackluster and earnings expectations are relatively low.
Growth deceleration?
While many are expecting growth deceleration in athletic footwear following more than three years of strong growth, Morgan Stanley believes that casual athletic fashion footwear could drive sales and earnings even higher in the space. Sole notes that few were expecting this trend to develop, but that it could push stocks and future earnings estimates even higher.
Under Armour Inc (NYSE: UA)
Although Morgan Stanley is in-line with consensus earnings estimates for Under Armour, Sole believes that the risk is to the upside. “Valuation remains at a high peak, but our view is as long as UA’s 2Q report indicates its story is getting better, and we think it will, the stock should rise,” Sole explains.
Pair trades
For traders who want to play the trend in athletic footwear but want to avoid the risk that overall footwear numbers could disappoint, Morgan Stanley recommends the following two earnings pair trades:
1. Buy: Skechers USA Inc (NYSE: SKX)
Sell: Steven Madden Ltd (NASDAQ: SHOO)
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2. Buy: Nike Inc (NYSE: NKE)
Sell: DSW Inc (NYSE: DSW)
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.