Why Nike Stock Is Up By 4% Today

Key Insights

• Nike earnings exceeded analyst estimates. 
• The company’s gross margin increased despite supply chain problems. 
• Nike stock may gain additional upside momentum in case demand for riskier assets continues to grow.

Nike Stock Rallies After Strong Earnings Report

Shares of Nike  gained strong upside momentum after the company released its fiscal third quarter earnings report. The company reported revenue of $10.9 billion and GAAP earnings of $0.87 per share, beating analyst estimates on both earnings and revenue.

The company noted that “NIKE Brand Digital business fueled growth, increasing by 22 percent […]”. Nike’s gross margin increased to 46.6% despite supply chain problems and rising inflation.

The report highlighted Nike’s ability to operate in the current market environment thanks to the success of its digital strategy and its strong brand. The market was happy with the strong earnings report, and Nike shares made an attempt to settle above the $139 level.

What’s Next For Nike Stock?

Analysts expect that Nike will report earnings of $3.65 per share in the current fiscal year and earnings of $4.65 per share in the next fiscal year, so the stock is trading at 29 forward P/E.

It should be noted that earnings estimates have been moving lower in recent weeks as analysts were worried about supply chain problems and the impact of rising inflation on consumers’ ability to purchase Nike products.

The earnings report indicated that Nike was able to show strong results in the current market environment, so earnings estimates may start to move higher in the upcoming weeks, which will be bullish for the stock.

The key question is whether the market is willing to pay about 30 forward P/E for an apparel company in the rising interest rate environment. At this point, it looks that Nike stock will have a good chance to gain additional upside momentum in case demand for riskier assets continues to increase despite geopolitical uncertainty and hawkish Fed.

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