​​What impact may Nike’s earnings have on its share price?

[MongiIG]

Why Nike shares remain in a rut?

Source: Bloomberg

 

Shares Nike, Inc. Price Share price Candlestick Profit

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Tuesday 26 September 2023 14:02

Nike earnings due

Nike is set to announce its earnings this week. Analysts predict that the company will earn 74 cents for each share with a total revenue of $13billion. This is in comparison to the same period last year when earnings were 93 cents per share on total revenue of $12.69 billion.

However, it's not all bad news for Nike. When compared to other companies in the same industry, Nike's profit margins are still above average, and its valuation is below the long-term average.

There is also a slight recovery in China, which is Nike's second-largest market. With China relaxing some of its Covid restrictions to boost economic growth, Nike stands to benefit from the ongoing reopening. There might be some positive changes in Nike's fundamentals. But for the company's shares to increase significantly in the near term, Nike needs to find ways to boost revenue growth and increase profit margins.

Poor performance so far this year

Nike’s stock price hasn’t performed well this year, with a 23% drop to date. This is in stark contrast to the 13% increase in the S&P 500 index. Over the past one and three years, Nike's shares have dropped by 9% and 30% respectively, while the S&P 500 index has increased by 32% and 145% during the same periods.

Nike analyst ratings, price targets and sentiment

Source: Refinitiv

Refinitiv data shows a consensus analyst rating of ‘buy’ for Nike. Analysts show 7 strong buy, 15 buy, 9 hold, 4 sell and 1 strong sell - with the median of estimates suggesting a long-term price target of $123.00 for the share, roughly 35% higher than the current price (as of 26 September 2023).

Source: IG

IG sentiment data shows that 92% of clients with open positions on the share (as of 26 September 2023) expect the price to rise over the near term, while 8% of clients expect the price to fall. Trading activity over this week shows 55% of buys and this month 52% of sells.

What does the technical picture look like?

Nike’s share price is currently in free fall and is fast approaching its October 2022 low at $82.22. The question is whether the share price can hold above that low after this week’s first quarter (Q1) results. If not, that is to say if a weekly chart close below the $82.22 low were to be seen, the June and August 2019 lows at $78.19 to $77.07 would be next in line.

NYSE Nike Weekly Candlestick Chart

Source: TradingView

For the bulls to be back in control in the medium-term the last weekly reaction high – a high on a weekly candlestick which is higher than that of the week preceding it and following it – at the $111.95 early August high would need to be exceeded.

NYSE Nike Daily Candlestick Chart

Source: TradingView

On the daily chart the last reaction high was made at $98.15 in mid-September and below it solid resistance can be spotted between the August and 13 September lows at $95.66 to $96.55.

Below these levels the August-to-September downtrend line can be spotted at $95.00 and is likely to cap any short-term bullish reversal, were it to be reached at all.

 

 

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