Earnings Preview: Nike Inc (NKE)

Analysts and options traders are mainly bullish on NKE ahead of tonight's earnings report

by Kirra Fedyszyn

Published on Dec 22, 2015 at 2:51 PM
Updated on Jun 24, 2020 at 10:16 AM

Athletics retailer Nike Inc (NYSE:NKE) has been strong on the charts this year, adding 36.8% in 2015, and hitting an all-time high of $135.30 in late November. The company will report earnings for its second fiscal quarter after the market closes tonight. Then, on Wednesday, the shares will undergo a 2-for-1 stock split.

Nike Inc has recently earned a handful of bullish analyst notes ahead of tonight's earnings report. Of the 24 brokerages providing coverage, 20 currently say the stock is a "buy" or better. And the average 12-month price target of $143.18 is well into record-high territory. Short interest on the equity is low, as well, accounting for less than 1% of NKE's available float.

Options traders have also shown NKE bullish attention lately. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 1.40 is higher than three-fourths of all comparable readings from the past year.

Today, both puts and calls are crossing the tape at twice their average intraday rate. The top spot belongs to the weekly 12/24 125-strike put, where more than 1,400 contracts have been traded. This out-of-the-money option will expire at Thursday's early close, indicating that buyers of the put are bracing for a quick post-earnings drop.

However, it's possible that some of these put buyers are actually shareholders hedging their bets against a disappointing earnings report -- and data from the International Securities Exchange (ISE) points to some put-selling activity at this strike, as well. With NKE's implied volatility on the rise ahead of earnings, short-term put sellers are most likely trying to capitalize on inflated premiums.

Based on the stock's weekly 12/24 at-the-money 131-strike straddle, it appears traders are pricing in a 5% post-earnings swing -- on par with NKE's average one-day post-earnings move of 4.8% over the last eight quarters. Nike Inc (NYSE:NKE) is trading 1.4% higher today at $131.55.

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