Nike: Under Pressure Below $100

Written by Larince Zhang

Nike, Inc., an American multinational corporation founded in 1964 which is specialized in the design, development, marketing and sale of athletic footwear, apparel, accessories, equipment and services, shall release its earnings report for Q1 2022 on 29th Septemberafter market close. According to Statista, Nike ranks the first among other competitors in terms of brand value, at 33.176B. As of the latest data recorded, the company has a total of 344 retail stores in the US and 1046 retail stores worldwide. The company has 702 non-US retail stores (factory stores, in-line stores and Converse stores).

Fig.1: Reported Sales versus Analyst Forecast for Nike, Inc. Source: money.cnn

Despite heightened inflation, supply chain challenges and Covid lockdowns in China, Nike posted earnings which exceeded consensus expectations. In the company’s latest announcement, sales were reported to have jumped 11.93% from the prior quarter, to $12.2B. Throughout 2021, total reported sales were $46.7B, slightly higher than consensus estimates of $46.6B. Annual net income for the year hit $6.05B versus $5.73B a year ago.

In the upcoming quarter, it is expected the company’s sales will hit $12.3B, up 0.82% compared to previous quarter and the same quarter last year. The management, on the other hand, maintains a “flat to slightly up” outlook as the company expects performance to be continually dragged by Covid disruption in China. On a brighter note, the management also sees “no signs of pullback in consumer behavior”, and even that “consumer demand has exceeded available inventory”.

Fig.2: Reported EPS versus Analyst Forecast for Nike,Inc. Source: money.cnn

Earnings per share (EPS), on the other hand, fell below analyst expectation to $0.90 in the previous quarter, but in general was better than Q3 and Q2 which were reported at $0.87 and $0.83 respectively. Nevertheless, thanks to better EPS achieved in Q1, the reported annual earnings for 2021 stood at $3.75, up 5.3% from 2020. Analysts expect the company’s EPS to perform better in the coming quarter, at $0.92, up by 2 cents from the previous quarter, yet below the same quarter last year by -20.69%.

In general, Nike’s strong brand positioning strategy, its pipeline of innovative products, deep connection with consumers etc shall serve as attractive factors for the company’s growth in the long term. Nevertheless, it might be inevitable that the Fed’s hawkish stance in monetary policy as a means to tackle heightened inflation shall continue to hurt companies including Nike, Inc. in the near-term. Therefore, it would not be a surprise to see “less-than-stellar results” in the coming quarters, as warned by some analysts.

Technical Analysis:

The #NIKE ($NKE) share price last closed at $96.87. Last year, Nike’s share price hit its peak at $179.10, equivalent to nearly 200% gains since its rebound from the lows seen in January 2020, at $60. To date, the price has retraced more than 61.8% of the trend. $105.50 and the 100-day SMA serves as the nearest resistance, followed by $119.55 and $133.60. On the contrary, the low of June 2020 ($93.10) serves as minor support to watch in near term. Breaking below this level shall encourage the bears to continue testing the next support at $85.50, followed by $76.50 and finally $60.

About the author

Larince Zhang

Larince entered the world of live market analysis and trading in 2013. Her passion ranges from foreign exchange to commodities, indices and futures as well as stocks. Having a Bachelor Degree majoring in Banking and Finance, she strives to make full use of her learned knowledge together with practical trading to achieve a more comprehensive market analysis.

Through years of trading experience, she believes “Simple is Best”, as the market is driven by human activity. It is human psychology that one should opt to improve on instead of mere technical or fundamental analysis. She believes in three core elements to a mature trading approach – scrupulous trading mindset, well-planned strategies and strict money management.