Based on the information provided, it is suggested that Foot Locker (FL) is a cheap stock with potential for growth. The company is expected to reach all-time high revenues and earnings this year. However, some analysts and investors believe that the positive performance is due to temporary factors, while the presenter believes that higher profits and earnings are structural and durable. The presenter sees potential for upward revisions, multiple expansion, and estimates a potential 50% upside.
There is speculation that Nike (NKE) could acquire Foot Locker to accelerate its Consumer Direct Offense. Nike has a significantly higher market cap of 260 billion compared to Foot Locker’s 6 billion market cap. Nike also has a large amount of cash and long-term debt. Even if Nike paid a 50% premium for Foot Locker and lost half of Foot Locker’s non-Nike business, it is estimated that the deal would still add materially to Nike’s pre-tax income. A deal involving Nike shares or a combination of stock and cash is also seen as possible and immediately accretive.
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