Trading Nike (NKE) Stock Earnings Expectations
Jun 26, 2023
Nike has surprisingly underperformed in 2023, even after exceeding previous EPS and revenue estimates in the past few earnings calls. The stock is down almost 6% on the year, while the S&P 500 and NASDAQ are posting big gains.
Nike appears to be working through some cost issues, as the company is expected to report a decrease in EPS from $0.79 to $0.67, even though they're expected to post an increase in revenue from last quarter's $12.39 billion to $12.59 billion.
Quarterly earnings will be released on Thursday, June 29 at 3:15pm CST.
Even though NKE is working through some turbulent times, 24 of 37 analysts have this stock pegged as a "buy" or "strong buy" in the tastytrade research tab, likely because the company has such strong brand recognition and loyalty—and offers a dividend as well—the last dividend was a healthy $0.34 per share in early June.
The market is expecting a large move from this earnings announcement relative to further-dated cycles, as we can see when looking at the implied volatility of the weekly options cycle that expires Friday.
NKE stock is expected to move +- $7.58 this week, which is about 6% of the current stock price, while the expected move for the August monthly cycle 53 days from expiration is only +-$9.64.
Looking deeper into the options prices, we can see that there is a strong call skew in the weekly cycle as well. This doesn't mean the stock is going to go up from the earnings call, but it does tell us that the market is putting an emphasis on risk to the upside if there is going to be an outsized move. From an options strategy perspective, Skew can help us lean toward one strategy over another, as a bullish vertical call spread would be cheaper than a bearish vertical put spread in this environment, with so much premium collected in the out-of-the-money (OTM) short call option. That said, traders would still need to be directionally correct after earnings for the trade to post a profit.
Will Nike beat earnings yet again, amidst growing concerns that the earnings-per-share figure is falling? And if so, how will the market digest the information?
All eyes are on Nike stock (NKE) on Thursday, June 29 after the market closes, as the market is expecting some potential fireworks.
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.
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