Many industry observers believe that the footwear giant has too many things going against it, including adverse effects from foreign exchange, excess inventory, and a slowdown in consumer demand in key areas.
Nike Stock (NKE) Price Analysis
According to FactSet’s average estimate of analysts, Nike (NYSE:NKE) is anticipated to report an adjusted net income of $1.5 billion, or 92 cents per share. This is a decrease from the $1.87 billion reported in the same period the previous year by 19.8 percent.
In the midst of a broad decrease in the Nike stock price, the firm was able to provide some much-needed relief by outperforming analysts’ forecasts during the prior quarter. Given that Nike stock price per share has declined by 40% so far this year to $98.70 as of Wednesday’s closing, it is astounding to see such a bad performance from one of the S&P 500SPX +1.97%’s most consistent winners. Nike stock’s value has increased by 90 percentage points within the same time period, compared to a 47 percentage point increase in the S&P 500 Index.
However, even if Thursday’s number is worse than anticipated, it’s likely that the stock price won’t be significantly affected because the shares have already been under so much pressure. This is a result of the fact that shares have already been under intense pressure.
Citi analyst Paul Lejuez noted in a research note that “We observe that sentiment ahead of the print is quite unfavorable, hence restricting downside to shares.”
Investors are concerned about whether or not Nike will be able to maintain growth despite the fact that the global macroeconomic situation is becoming more complex. Nike’s company in North America had a decline of 5% during the most recent quarter, while sales from the larger China area dropped by almost 20%.
The analysts don’t anticipate either region to show a significant amount of progress. Lejuez observes that the macro picture in China continues to appear the same as it did in June, which is worse than what it looked like in March. Even while things were looking up for North American consumers, that situation can shift as the economy continues to deteriorate.
The company’s bottom line is likely to suffer as a result of the slowing growth of its top line. At the most recent earnings conference for the business, Chief Financial Officer Matthew Friend stated that Nike anticipates a decline in gross margins of more than one percent throughout the quarter. According to Cristina Fernandez, an analyst at Telsey Advisory Group, in a research note, inventory problems will be the primary driver of that reduction. According to Fernandez, Nike may be obliged to lower their prices in order to clear their surplus inventory and stay competitive with their competitors, many of which have already significantly reduced the cost of their items.
Many analysts have already reduced their predictions and price goals in anticipation of Nike’s earnings, so investors may have already considered those worries. The stock was downgraded by Barclay’s last week, and the brokerage decreased its price estimate for the shares from $125 to $110. Citi’s Lejuez decreased his price target from $116 to $113 and maintained his Neutral rating, while Fernandez kept her Outperform rating but decreased her price target from $130 to $125.
However, many people continue to be optimistic. Matthew Boss, an analyst at J.P. Morgan, stated that the stock had achieved “peak negativity” prior to the report, which he saw as signaling an opportunity to purchase the drop.
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