Nike stock price at seven-month high ahead of earnings

Nike earnings – what to expect

NIKE Inc (All Sessions) reports earnings on 21 December, covering its fiscal second quarter. Revenue is expected to be $13.46 billion, down very slightly, while headline earnings are forecast to rise to 85 cents per share, up 0.61%. It has beaten estimates for revenues in seven of its last eight reports, and has exceeded earnings forecasts in six of the past eight updates.

Nike is expected to benefit from the reopening of China after Covid-19 restrictions, as 15% of its sales come from the country. This could lead to accelerated growth for Nike until 2024. As sales improve in China, Nike's gross margin could also benefit from a more favourable mix and higher profitability.

Sales in China are expected to surge as consumers return to normal activities and engage in sports again. Nike's revenue in China has already seen a 25% increase in its Q4, but it could accelerate further as demand increases and Nike launches hyper-local products. The higher revenue growth in China can also benefit overall margin due to its typically higher profitability, while inventories remain manageable.

While increased discounts may pressure margin in the short term as Nike works to reduce inventories, the full-year gross margin could expand on lower freight costs and fewer markdowns. Nike has already reduced its inventories, with flat growth at the end of fiscal 2023 compared to the previous year.

Analyst ratings for Nike

Refinitiv data shows a consensus analyst rating of ‘buy’ for Nike – 9 strong buy, 17 buy, 11 hold and 2 sell - with the mean of estimates suggesting a long-term price target of $124.50 for the share, 3% above its current value as of 18 December 2023.

Technical outlook on the Nike’s share price

The Nike share price, which has risen by less than 3% year-to-date but by over 37% since the end of September, is back on an upward trajectory with the 200-week simple moving average (SMA) at $122.41 about to be reached.

Nike Weekly Candlestick Chart

The next higher January and May 2023 peaks at $128.68 to $131.31 would need to be exceeded on a weekly chart closing basis for a long-term bullish reversal in the Nike share price to be confirmed. If so, the December 2020 high at $147.95 would be targeted.

Nike Daily Candlestick Chart

On the daily chart the 2023 downtrend has clearly been reversed several days after Nike’s late September Q1 earnings result after which the share price gapped higher.

The successful retest of the breached May-to-October downtrend line, which because of inverse polarity acted as a support line in late October, and subsequent rise above the $111.95 August peak point to a bullish medium-term trend reversal.