Unboxing Nike After a Seismic Earnings Report

Nike's sales forecast for 2021 topped $50 billion

Managing Editor
Jun 25, 2021 at 11:36 AM
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Nike Just Did It. And by It, we mean blow the doors off its latest quarterly report. Nike, Inc. (NYSE:NKE) is up 14% to trade at $152.24 at last check, after the blue-chip retailer reported adjusted fourth-quarter earnings of 93 cents per share, hurtling past the estimated 52 cents per share. Not only was revenue in line with expectations, but a $50 billion sales outlook roared past Wall Street estimates. It appears as socialization starts to drift toward pre-pandemic levels, shoe sales -- especially fashion-forward brands such as Jordan -- are reaping the benefits. 

Analysts have rushed to adjust their stance. At last check, 12 analysts have issued price-target hikes, the highest coming from Stifel to $214 from $168. Barclays noted the "worst is now behind NKE." With Euro's in full swing and the Tokyo Olympics coming up, Nike is in pole position to take advantage of the exposure, with its latest gear on full display all summer. To underscore the impact of this report, retail stock Foot Locker (FL), as well as sector peers Adidas and Puma, are all higher today and enjoying the halo lift.

Prior to today's breakout, Nike stock had been staring up at its 100-day moving average since a mid-March post-earnings bear gap. The gains today have NKE reclaiming its year-to-date breakeven level, and padding its 49% year-over-year gain.

NKE Stock Chart

There isn't much contrarian pessimism to be unwound; most analysts are already bullish on NKE and a slim 2.1% of the stock's total available float is sold short. That said, now may be the right time to weigh in on the equity's next move with options. This is per the equity's Schaeffer's Volatility Index (SVI) of 24%, which stands in the extremely low 4th percentile of readings from the past year. In simpler terms, options players are now pricing in low volatility expectations.

The options pits are responding how you'd imagine. In just the first two hours of trading, 315,000 contracts have changed hands, volume that's 15 times the average intraday amount. The July 150 call is seeing notable attention, indicating some options bulls are banking on this breakout from NKE to last into the heat of summer.

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