According to The Athletic, Nike (NYSE:NKE) has formally severed its relationship with Brooklyn Nets star Kyrie Irving resulting in a drop in Nike stock price. Kyrie Irving is no longer a Nike athlete, according to a business spokesperson, Athletic writer Shams Charania tweeted. Irving, who is currently a footwear free agency, owns one of the most well-known signature shoes in the NBA.

The estimated value of the agreement is at least $11 million annually. The star’s sneaker was among the top 5 models used by players in 2021, according to NBA footwear tracker Kixstats.

After Irving promoted an anti-Semitic documentary at the beginning of November, the large footwear and clothing company previously cut off contact with him. The contentious point guard’s contract originally had a termination date of October 2023.

2023 Nike Stock Outlook

In 2022, Nike (NYSE:NKE) encountered its fair shares of difficulties, such as excessive inventory levels, COVID-19 lockdowns in China, and a stronger dollar, but these issues are all transient in nature. As a result, even though Nike’s stock has been down 36% year to date in 2022, there is still a lot of demand for its goods in general.

Although investors have chosen to focus on diminishing earnings, which are a result of the aforementioned difficulties, Nike’s most recent quarter saw currency-neutral revenue increase by at least 13% in every area save from China. The good news is that those problems appear to be going away in 2023.

For instance, there are indications that China’s zero-COVID policy is eroding. Investors are hoping the protests will encourage the government to take additional steps toward opening up after the administration announced it would ease some restrictions for international travelers. 

Profits have also been impacted by inventory reduction efforts, but those are expected to be finished within the next two quarters. At its September earnings call, the company stated that it was “taking decisive measures to remove inventory” despite the fact that inventories were up 44% as of August 31. When the company rightsizes its inventory position, this will have a short-term negative impact on gross margin but position the business for long-term growth.

Finally, the U.S. dollar is losing strength, and November is on course to see the dollar index’s worst performance in a decade. The value of Nike’s overseas sales will increase if the current trend holds until 2023.  

Investors are penalizing Nike for short-term setbacks, despite its solid competitive advantage, particularly while rival Adidas deals with the impact of its relationship with Kanye West. The sportswear stock may recover most of its current losses in 2023 after they fade.

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