Buy or sell Nike shares before earnings?


Following the close of market action today, Nike (NKE) will in turn deliver its latest financial report. While undoubtedly one of the giants of the stock market, the gas machine has by no means been immune to bearish moves in the market. Equities have underperformed broader markets this year and are currently 42% in the red year-to-date.

Could the FQ1 report (August quarter) tip the scales in favor of Nike? That remains to be seen, although Baird’s Jonathan Komp believes that due to concerns over gross margins, headwinds from China and “global economic uncertainty”, the market is bracing for Nike to miss consensus EPS. $0.93 FQ1.

On that front, Komp is more bullish, predicting EPS of $0.99. Additionally, based on expectations for “healthy growth” out of currency in North America, EMEA and Latin America, the analyst’s forecast for revenue of $12.67 billion are also above consensus at $12.26 billion.

With Nike’s growing digital business, a look at website traffic lends credence to Komp’s high expectations. During the quarter, unique visitors (UVs) increased approximately 30% sequentially, and an even more impressive 60% compared to the same period a year ago.

That said, Komp thinks the outlook could potentially disappoint. Based on “the currency and possibly other macro-related headwinds,” Komp is bracing for some “negative F2023E EPS reviews.”

Still, looking further down the line, the analyst believes the lackluster performance in stocks presents an opportunity for those taking a long-term view.

“While the fundamental outlook remains somewhat murky, we believe sentiment has evolved too negatively against strong NKE brand fundamentals, supportive DTC-led model and, in our view, strong earnings potential on several years,” summarized Komp. “After stocks have fallen -41% since the start of the year, we are seeing an improvement in the risk/reward ratio, especially after the FQ1 ratio.

Going into print, Komp maintains an outperform (i.e. buy) rating with a price target of $127. The implication for investors? Over 32% from current levels. (To see Komp’s track record, Click here)

Most analysts are with Komp here; the ratings are split between 12 and 6 in favor of Buys vs. Reserves, resulting in a consensus Moderate Buy rating. At $125.35, the mid-price target implies the stock will appreciate 30% over the coming year. (See Nike stock predictions on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.


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