Options Traders React to Nike's Revenue, Guidance Miss

Nike's revenue miss isn't deterring options traders

Deputy Editor
Mar 19, 2021 at 9:50 AM
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The shares of Nike Inc (NYSE:NKE) are down 2.6% to trade at $139.79 this morning. While the blue-chip retail giant reported adjusted fiscal third-quarter earnings of 90 cents per share, that came in well above Wall Street's estimates of 76 cents, revenue of $10.36 billion finished below the forecasted $11.02 billion. The company chalked up the miss to port-related issues in the U.S. and pandemic-related store closures in Europe that delayed shipments. Additionally, Nike's full-year revenue outlook was lackluster, but that wasn't enough to slow down analysts, who were quick to dish out price-target hikes.

The largest of the four price-target hikes came from Credit Suisse, who raised its target to $176 from $162. Analysts were already optimistic coming into today, with 19 of the 22 in coverage sporting a "buy" or better rating. Plus, the stock's 12-month consensus target price of $164.61 is a 15% premium to last night's close.

On the charts, Nike stock has jumped all over the place the last three months. After racing to a record high of $147.95 on Dec. 21 the shares have started the new year mostly consolidating between the $130 and $146 level. Longer term, NKE is up 110.4% year-over-year.

The options pits have come alive this morning. Calls are trading at nine times the average intraday amount, while puts are coming in at 13 times the average intraday amount, both volumes in the 100th percentile of its annual range. Leading the charge is the March 140 call, which expires today, as well as the April 155 call. On the put side, the April 125 contract is popular. 

The good news for options traders is that with earnings in the rearview, a volatility crush has made NKE premiums more affordable. The security's Schaeffer's Volatility Index (SVI) of 36% sits in the 16th percentile of its annual range. This means option traders are pricing in relatively low volatility expectations at the moment.


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