Nike Earnings Preview: Rallying From the 2023 Low
By:Mike Butler
Nike (NKE) has had a volatile year to this point, with the stock opening 2023 at $118.55 and reaching an annual high just a few weeks later at $131.31.
Just looking at the quarterly earnings results may have fooled you though, as Nike beat earnings-per-share (EPS) and revenue handily in the March 2023 earnings call, but the stock tumbled to the $100 range and reached a low of $88.66 on Sept. 28 just before the last earnings call.
Since then, the stock has surged back to $122 ahead of earnings this week. That translates to a 36% gain from the low to the current price, which is an enormous number. But we can't forget about the massive rally we've seen in the overall market in a similar period.
Nike stock has an expected move of +-$6.59 this week based on current implied volatility, which is about 5% of the current stock price. Looking further to the 2024 February and March cycles, we can see that this expected move makes up a sizable chunk of the expected move for each cycle. This tells us that the market is placing a heavy weight on the earnings report and sentiment going into 2024.
Nike has had a volatile year, but they've been able to increase their quarterly revenue the last three quarters in a row.
If the household name shoe brand can paint a bullish picture for next year while beating EPS and revenue figures this time around, it would not surprise many to see the stock climb higher before the year ends.
On June 29, we saw an EPS miss and a narrow revenue beat from their earnings report and the stock dropped. On Sept. 28 we saw a big EPS beat, and a narrow revenue miss and we saw the stock skyrocket. It appears that's the narrative for Nike, if the earnings call reflects a weak profit margin, may result in the stock price taking a hit.
The Nike brand is both function and fashion forward, which adds to their ability to bump price margins up a bit relative to competitors, but if they miss the mark from an EPS perspective, I'd be surprised to see the stock rally.
Tune in to Options Trading Concepts Live on Thursday, Dec. 21 at 11 a.m. CDT for a full strategy breakdown ahead of the Nike earnings call.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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