Don’t sleep on athleisure.
Calling the state of retail “survival of the fittest,” BTIG initiated buy ratings on Nike, Lululemon, Canada Goose, Deckers Outdoor, Lovesac and Yeti; neutral ratings on VF Corp., Steve Madden, Capri Holdings, Tapestry and Columbia Sportswear; and a sell rating on Under Armour.
Stocks like these do have the potential to endure through the coronavirus-driven economic slowdown, Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, told CNBC’s “Trading Nation” on Wednesday.
With millions working and learning from home, athleisure wear will only become more “acceptable” than it already was in everyday life, Bapis said.
“We’re looking at companies that have powerful balance sheets,” he said. “Cash is going to be king right now, and it depends on the ability to distribute online, the ability to get online orders filled and get them shipped.”
“[The] at-home fitness craze is taking over, so you have to wear something when you’re doing that,” Bapis said. “So, I just think it’s going to come down to balance sheet and ability to weather this storm long term. And you’re also looking at a retail space where there’s not going to be, [for] at least six, nine, 12 months, the in-store experience, and sales are going to be much, much lower.”
Matt Maley, chief market strategist at Miller Tabak, cautioned that BTIG’s call may have come too late.
“The one thing I’m a little worried about [is] just the timing, because a lot of these stocks have had a great run,” he said in the same “Trading Nation” interview. “They’re getting a little bit overbought on a technical basis. But they’re not severely so, and so I guess my point is we don’t want to chase them too much, but maybe more on a mild pullback.”
Two stocks on BTIG’s list nevertheless stood out to the chart analyst.
“The less-risky stock is Nike,” Maley said, citing its chart.
“It’s bounced back obviously very strongly, but it stalled out a little bit earlier than some of the others,” Maley said. “It got right up to its 200-day moving average, pulled back in early May, got back up to it again a couple of weeks ago, but hasn’t been able to break above it. Once it can break above that line, that’s going to give the stock a lot of momentum on a technical basis, so, that’s really a good one.”
Nike shares were down nearly 1% in Thursday’s premarket trading, around $87.26.
“The other one I’m a little hesitant to talk about … [is] Under Armour. Here’s a stock that has done so poorly not in just the last couple of months, but in the last few years,” Maley said.
“Everybody hates the stock, but it is rallying back to … a key resistance level,” he said. “The $11.60 level was the lowest it hit back in 2017. It broke below that this year. That old support level’s now new resistance and it’s getting very close to that level.”
Hated stock or not, Maley said, “some of the stocks that do the best in the [market] rebounds are the ones that have been doing poorly for a long period of time.”
“So, it’s a risky name. You definitely want to have a tight stop in case it comes back down, but that’s one that can see a lot of surprising upside as we move through the year,” Maley said.
Under Armour was down fractionally in Thursday’s premarket, trading at $9.76.
Disclosure: Bapis owns shares of Nike and Lululemon.