Nike Stock Pressured by Pre-Earnings Bear Note

The analyst noted a chilling number of headwinds that could impact earnings

Deputy Editor
Sep 20, 2022 at 10:09 AM
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Barclays today downgraded blue-chip apparel maker Nike Inc (NYSE:NKE) to "equal weight" from "overweight," and slashed its price target to $110 from $115. The analyst cited a deluge of risks for NKE, including volatility in China, excesses inventory in North America, and currency headwinds in Europe. This bear note comes just ahead of Nike's fiscal first-quarter earnings release, which is due out after the close on Thursday, September 29, and Barclays warned of the North American market's inability to "subsidize" China's flailing results, which could weigh on the company's future earnings.

In response, Nike stock was last seen 3.7% lower to trade at $103.23, holding just above its July 1, annual low of $99.53. Trending lower since a Nov. 5, all-time high of $179.10, the equity's most recent breakout attempt was capped in mid-august by its descending 120-day moving average. NKE is now 37.5% lower in 2022.

Nike has a rather upbeat post-earnings history. In the last eight quarters, five post-earnings reactions have been positive, including a 6.1% pop in December. The company's last report, however, resulted in a 7.2% bear gap. Overall, NKE averages a post-earnings move of 6.8% in the last two years, but for tomorrow's trading, the options market is pricing in a larger-than-usual post-earnings move of 9.6%, regardless of direction.

It looks like options traders may be trying to identify a bottom for NKE, as call volume is running at a higher-than-usual clip. At last check, 4,225 bullish bets have already crossed the tape today, which is double the intraday average, while the 2,606 puts exchanged so far is about 1.7 times what's typically seen at this point. Most popular is the January 2023 120 call, while new positions are being opened at the 9/30 105-strike call.

Now could be a good time to speculate with options, too, as the security's Schaeffer's Volatility Scorecard (SVS) sits at an elevated 88 out of 100. This indicates the security has exceeded volatility expectations during the past year.

 

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