Bull Notes Boost NKE Ahead of Q4 Earnings Report

Call traders are starting to pile on the blue-chip retailer, too

by Fernanda Horner

Published on Jun 23, 2020 at 3:27 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of Nike Inc (NYSE: NKE) are up 2.4% to trade at $102 at last check, after the company earned no less than four price target hikes this morning, including one from Needham to $113 from $80. The brokerage models noted swift sales recovery expectations, as well an uptick in digital demand that should accelerate Nike's transition into a direct-to-consumer company. The positive attention comes only a couple of days ahead of Nike's fourth-quarter earnings report, which is due after the close on Thursday, June 25. Below, we will take a look at how the equity has performed on the charts as of late, and explore some of the options activity surrounding Nike stock ahead of the event. 

Nike stock has staged an impressive comeback since dropping to a three-year low near the $60 level in mid-March. Earlier this month, shares broke north of the $104 mark, knocking on the door of their pre-pandemic high of $105.65 in January. And despite the subsequent pullback from that tricky $105 region, the blue-chip retailer found support at its ascending 40-day moving average. Longer term, NKE sporting a 20% lead for the last 12 months. 

Analysts remain firmly in the bullish camp. Of the 26 in coverage, 21 carried a "buy" or better recommendation, while the remaining five carried a "hold" or worse. However, the 12-month consensus target price of $105.08 is only a 3.27% premium to current levels, so more bull notes could be on the way should NKE step out of the earnings confessional favorably. 

As of today, 36,000 calls have changed hands-- two times what is normally seen at this point and triple the number of puts traded. Most popular by far is the weekly 6/26 105-strike call, followed by the 7/2 110-strike call, with new positions being opened at the latter.

A look at NKE's history of post-earnings reactions during the past two years shows a generally positive response. During its last eight reports, five of these next-day sessions were higher, including a 11.1% jump in June 2018 and a 9.2% pop on March 25. The security averaged a post-earnings swing of 5.1%, regardless of direction. This time around, the options market is pricing in a slightly higher move of 7.2%. 


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