Nike Headwinds Grow Ahead of Report

Dow component Nike Inc. (NKE) reports Q3 2022 results after Monday’s closing bell, with analysts looking for a profit of $0.71 per-share on $10.61 billion in revenue. If met, earnings-per-share (EPS) will mark a 21% profit decline compared to the same quarter last year. The stock rose 6.2% in December after beating Q2 top and bottom line estimates but turned south with other mega-cap stocks in January 2022 and has carved a 25% year-to-date loss.

Russia, China and MLB

A slow China rebound and chronic supply chain disruptions have impacted annual performance, along with political events that have reduced risk appetites for international growth stocks. Last week’s Major League Baseball settlement removed a major obstacle from the agenda but Nike just shut down the stores it owns and operates in Russia, eliminating another income source. It’s also halted online sales in the rogue state, walking away from rapid sales growth.

Credit Suisse analyst Michael Binetti reiterated an ‘Outperform’ rating and $160 price target this week while lowering quarterly and full year earnings estimates, As he notes, returns are being impacted by a “growing list of global macro factors (inventory shortages, Russia/Ukraine, new China lockdowns, and US/Europe consumer inflation)”. Jefferies analyst Randal Konik just cut his earnings estimates as well, warning clients about the “volatile macroeconomic backdrop”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 18 ‘Buy’, 5 ‘Overweight’, 7 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $125 to a Street-high $199 while the stock is set to open Thursday’s session on top of the low target. This dismal placement highlights the failure of analysts to measure the long-term impact of adverse trends on a broad range of widely-held issues.

Nike cleared January 2020 resistance at 105.62 in August, entered a two-legged uptrend that ran out of steam near 175 in August 2021. A November breakout attempt failed, ahead of a steady downtick that completed a double top breakdown in February. This pattern yields a measured move target near 109, or about 16 points below Thursday’s opening print. 50-month and 200-week moving average support are closely aligned at that level, raising the stakes for bulls in coming weeks.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.