LeBron James and the All-Star Rally Cry Around His Sponsor's Stocks

CLEVELAND, OH – MAY 05: LeBron James #23 of the Cleveland Cavaliers celebrates after hitting the game winning shot to beat the Toronto Raptors 105-103 in Game Three of the Eastern Conference Semifinals during the 2018 NBA Playoffs at Quicken Loans Arena on May 5, 2018 in Cleveland, Ohio. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement. (Photo by Gregory Shamus/Getty Images)

On July 1, 2018, LeBron James signed a 4-year, $154 million deal with the Los Angeles Lakers. On the back of this announcement, his sponsors may be finding the news, hype and publicity the equivalent to that of an all-star slam dunk contest. The rumors surrounding NBA free agents were wild going into last Sunday, and the league was in a chaotic state with the discussion surrounding LeBron James. With LeBron landing such a lucrative contract, his sponsors may be the biggest benefactors.  

Companies that sponsor or are endorsed by James may find the news to be an extra boost of attention on the back of his already brilliant career. The 6’8” forward and former Cleveland Cavalier is #6 on Forbes’ list of highest paid athletes. In 2017, James earned $33.5 million in winnings and salaries accompanied by a staggering $52 million in endorsements. In the same year, ESPN ranked James as the second most famous athlete in the world. While having 22 million followers on Facebook, more than 39 million followers on Instagram and a whopping 41.8 million followers on Twitter, his reach could prove to be profitable for the companies that he supports.

The two companies listed below are not only endorsed by the four time NBA MVP, but both have strong underlying financial metrics which make them great stocks to own, independent of basketball relations. Below, we list two stocks for companies endorsed by James that could produce a profit for investors. The foundation of our process is to identify companies that perform best on the collective basis of value, growth, EPS revisions, profitability and momentum. The CressCap systematic trading model gathers data daily on 6,500 companies globally and assigns academic grades (A – F) for each financial metric. These grades are scored relative to the stocks region and sector.

CressCap Investment Research

Expand to see how our directional recommendations are computed: CressCap uses a multi-factor model to select the best-performing stocks. Our data is updated daily and the academic grades (A – F) for each financial metric are scored and ranked on a regional/sector relative basis. The foundation of our recommendations is to identify companies that possess the collective investment style of Value, Growth, EPS Revisions, Profitability and LT Momentum. Academic grades of C or better indicate that each metric scores well compared to the peer sector

Apple Inc. (AAPL-US)

Beats Electronics LLC, a company that produces audio products, has been endorsed by LeBron since the company’s birth 2008. Beats Electronics was bought out by Apple Inc. in 2014 for over $3 billion. Apple Inc., is a powerhouse in the information technology sector and is known for designing, developing, and selling consumer electronics, computer software, and online services. SPN writers Marc Stein and Brian Windhorst have stated that LeBron realized a $30 million payout following the Apple and Beats Electronics deal.

Apple ranks 81 of 1,928 companies in the CressCap universe of stocks and it ranks 26 out of 402 companies in the tech sector. This stock has strong fundamentals and is accompanied by an A+ CressCap sector grade with a buy recommendation. On May 1, 2018, the company released their fiscal 2018 second quarter results. It posted a quarterly revenue of $61.1 billion, an increase of 16 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.73, up 30 percent. The profitability metric of this stock is very impressive, with ROE out performing the sector 36.87% to 5.91%, along with an A CressCap grade for ROI, EBIT margin and operating margin. The P/E FY1 for the stock is 16.32x to that of the sector 22.49x and EV/EBITDA for the stock is 14.00x compared to sector 14.72x, both showing the stock is of good value.

Kia Motors Corporation (000270-KR)

ADR (KIMTF-US)

This South Korean car manufacturing company has been endorsed by James since October of 2014, when he signed on to endorse the Kia K900. The stock is given an A+ grade by CressCap computer intelligence and stands out against the rest of the consumer discretionary sector with an impressive performance in both value and growth. Its value metrics are trading at a large discount to the sector, with a P/B ratio of 0.46x compared to 2.71x, and an EV/EBITDA ratio of 4.25x compared to the sector 12.17x. Kia’s B+ CressCap grade for growth is supported by the company’s two-year forward EPS growth rate performance, beating the sector by a wide margin of 123.36% compared to 31.64%. President and CEO Han-Woo Park, stated that in 2017 their brand value continued to grow, reaching $6.7 billion, which placed Kia Motors as a global top-70 brand for the second consecutive year.  Although the momentum metric does not look favorable with a grade of C+, some of the more granular momentum metrics for this stock have us convinced it is one to watch. For the last 1 month and 6 months, analysts’ revisions have been A and A+ grades respectively, the latter with a 76% increase as the sector increased only 11% in the same period.

Written By: Steven Cress ([email protected]) and Alison Geary ([email protected])

For additional information, feel free to send questions to [email protected] or view our website www.cresscap.com. Please click here to view CressCap Investment Research’s full disclaimer.

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