Why Cheetah Mobile, Nike, and Canopy Growth Jumped Today

See how these three companies stood out even on a positive day for the broader markets.

Steve Symington
Steve Symington
Aug 20, 2018 at 5:18PM
Consumer Goods

The stock market continued moving higher on Monday, with both the Dow and S&P 500 extending last week's gains in a relatively quiet session.

But several individual stocks easily outpaced the major benchmarks today, including Cheetah Mobile (NYSE:CMCM), Nike (NYSE:NKE), and Canopy Growth Corporation (NYSE:CGC). Read on to learn why.

Stock market chart with dark blue background indicating gains

Image source: Getty Images.

Cheetah Mobile's impending return to growth

Shares of Cheetah Mobile roared 23.2% higher after the Chinese mobile internet specialist announced better-than-expected second-quarter results and encouraging forward guidance.

Cheetah Mobile's revenue declined 8.2% year over year to $166.8 million, while adjusted net income jumped 123.7% to $29.7 million, or $0.21 per diluted American depositary share. Most analysts would have settled for earnings of $0.09 per share on revenue of $155.2 million.

"We are pleased with the continued profit and margin improvements during the second quarter of 2018," CFO Vincent Jiang said, "especially in our utility product and related services business driven by the strong performance of our mobile utility products in the domestic market."

Better yet, Cheetah Mobile anticipates third-quarter revenue between $194.9 million and $204 million, good for year-over-year growth of 10% to 15% and far above the $168 million most on Wall Street were expecting.

Nike runs higher on multiple upgrades

Nike stock gained 3.1% in the wake of two analyst upgrades.

First, Piper Jaffray analyst Erinn Murphy increased her rating on Nike from neutral to overweight and raised her per-share price target from $72 to $93. After climbing 25% year to date as of Friday, Nike stock closed just below $80 per share.

To justify her optimism, Murphy pointed to its stabilizing North American market, strong margins, and an "extremely healthy" athletic-products industry that should fuel continued share price gains.

Susquehanna analyst Sam Poser echoed a similar sentiment, bumping his rating from neutral to positive and boosting his per-share price target by $15 to $93. Poser added that Nike is taking market share from competitors, and should have little trouble meeting its revenue goal of $50 billion by 2023. For perspective, this year Nike is expected to increase revenue by roughly 8% to $39.35 billion.

Can Canopy Growth float much higher?

Finally, shares of Canopy Growth Corp. jumped 11.2%, sustaining last week's momentum after global beer, wine, and spirits giant Constellation Brands (NYSE:STZ) announced a 5 billion Canadian dollar ($4 billion) investment in the Canada-based cannabis leader.

Canopy Growth stock popped nearly 30% last Wednesday alone when Constellation Brands unveiled its big investment, which it made at CA$48.60 per share, or a 37.9% premium to Canopy's five-day volume-weighted average share price. Keeping in mind Constellation previously purchased a 9.9% stake in Canopy Growth late last year, its latest move will bring its stake to a whopping 38% assuming it exercises its existing warrants. Constellation Brands also received new warrants that will allow it to increase its stake even further by "at least" another CA$4.5 billion.

With its fresh influx of capital, Constellation Brands notes Canopy Growth will be able to "bolster its leadership position in the global cannabis industry," including pursuing strategic investments needed to "establish global scale" not only in dozens of countries pursuing medical cannabis programs, but also for a growing number of new recreational cannabis markets.

Given the price at which Constellation Brands made its latest investment, the prospect of additional investments going forward, and the new funds available to lay its foundation for the future, it shouldn't be surprising to see Canopy Growth shares continuing to climb higher.