Why Nike Stock is Disabled and Running Today


What happened

Footwear retail giant shares Nike (NYSE: NKE) are trading higher this morning. After climbing nearly 7% in early trading, shares posted a 4.1% gain as of 11:20 a.m. ET. Even after reducing this initial increase, the rise in the share price represented an increase of market capitalization approximately $8.5 billion.

So what

The boost in investor valuations came after the company released its fiscal 2022 third-quarter results last night. Nike beat estimates for its quarterly period, which ended Feb. 28, with a profit of 0.87. $ per share on $10.9 billion in revenue. Analysts on average had expected $0.71 in profit and $10.6 billion in revenue, according to Refinitiv. Perhaps more importantly, the company said the decline in sales in China has eased and price realization has improved year over year there.

Image source: Getty Images.

Now what

Over the past nine months, Nike’s sales are up 7% from the year-ago period, while its cost of sales is up just 3%. Revenues grew faster than costs continued in the last quarter. However, even with this positive underlying business trend, Nike shares have fallen almost 20% so far in 2022.

That’s because investors don’t like uncertainty, and there’s been plenty of that for many international companies due to supply chain challenges, political friction between China and the United States, and of Russia’s invasion of Ukraine.

China is particularly impactful for Nike as one of its most profitable regions. Sales in China had fallen 24% year over year in the previous quarter, but that improved to an 8% drop in the last quarter.

Investors who see more clarity in Nike’s business in China, as well as much stronger positive sales growth in its other regions, now see the year-to-date share price decline as a good buying opportunity.

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Howard Smith has no position in the stocks mentioned. The Motley Fool owns and recommends Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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