Nike Releases Lackluster Earnings

Nike (Ticker Symbol: NKE) released a lackluster earnings report after the close yesterday.  The athletic wear giant reported a slight earnings miss of .62 cents per share vs. Wall Street analysts’ expectations of .66 cents per share. Nike reported revenues of $9.7 billion falling short of Wall Street analysts’ expectations of $10.1 billion.  The company’s positive news in the report was that its women’s business is up over ten percent for the year and has steadily increased throughout this year. Nike has added more sports bras with extended sizes and has added a women’s addition to its very popular Jordan shoe brand to expand its reach with female shoppers.  Nike historically sells more merchandise to men than women so this quarter is a step in the right direction.  

The athleisure market continues to grow and companies like Lululemon and Adidas are threatening to take market share with their new additions to footwear and clothes.  Domestically, Nike’s footwear sales solid for the quarter were up 9%, while the company’s equipment sales were up 7%. Nike is selling more products directly to consumers as department stores are continuing to struggle throughout the country. Despite the trade tensions currently going on with China, Nike hasn’t seen any negative effects on its business and continues to remain a brand for China.  

Nike’s stock started off 2018 in a four month long ascending triangle between the $70.00 and $62.00 price levels.  The stock found some support at its 100-day Moving Average in the second quarter of 2018. It then proceeded to break out of its triangle and continued to rally 22% before giving the whole move back in the fourth quarter of 2018 led by a disappointing earnings and guidance report in September.  

In 2019, Nike’s stock took off to a good start, breaking above its downtrend from 2018 and shooting above both its 100 and 200-day Moving Averages.  It continued to rally to an all-time high of $90.00 on April 18th, 2019. During that time, the stock began to top, forming a bearish divergence pattern, as indicated on the chart by the purple squares, where the stock makes a higher high in price but the Relative Strength Index makes a lower high. Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal, as occurred in Nike’s case.  The stock is currently finding some price support just under its 100-day Moving Average.

(Chart above courtesy of ​​)    

Based on a survey of 16 analysts offering 12-month price targets, the average price target for Disney’s stock is $93.47. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $83.08. 

Earlier this year, Nike announced a new service called Nike Fit. Nike Fit will scan users’ feet and determine the correct size shoe for each individual person.  It will even recommend certain pairs of shoes to the consumer based on their foot size. The new Nike Fit service is set to launch next month. Investors in the athletic apparel space should look to Under Armour’s (Ticker Symbol: UA) earnings release on July 28th for fresh news within the sector.  


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