To The Moon

$Nike(NKE)$ is scheduled to announce its fiscal first quarter of 2025 on Tuesday (01 Oct) after market close. This earnings result is coming just weeks after Nike announced a CEO change, with Elliott Hill set to take over from John Donahoe next month.

Market is expecting both sales and profits to be lower than last year, with total revenue expected to drop around 10%, from $12.94 billion in the first quarter last year to $11.65 billion this year.

The consensus for earnings per share is at $0.52, lower than $0.94 same period last year.

Competition From Incumbent Like Hoka and On Running

There are competition coming from incumbent brands like Hoka and On Running, this has caused their direct-to-consumer business which depends on their own physical stores and online retail network to reduce and faced with operational challenges when Nike tried to expand this part to have a head-to-head competition with their competitors. That has not worked well for them.

Moreover one of the important market for Nike - China is giving the demand uncertainty even though a stimulus package have been rolled out to clear some deepening issues in the economy,but how much have the consumer confidence returned in China for Nike product.

Nike’s Revenue Main Contributor From Emerging Markets

Footwear Revenues Account for 68% of Total Revenues – Nike’s footwear segment has consistently been the company’s main revenue generator, accounting for an increasing percentage of total revenues over the years.

Emerging Markets Hold a Significant Portion of Nike’s Revenue – Emerging markets contributed to nearly 12% of Nike’s total revenues in fiscal 2017. In fiscal 2023, Nike’s footwear revenue in the Asia Pacific and Latin America regions amounted to approximately 4.54 billion U.S. dollars. The company’s growth in China and India, along with a resurgence in regions like Latin America, indicate that emerging markets will continue to be a major contributor to Nike’s future success.

This is why China confidence and sentiment is important as the growth there would be key to Nike revenue growth.

Nike (NKE) Price Target Forecast

Based on 27 Wall Street analysts offering 12 month price targets for Nike in the last 3 months. The average price target is $92.83 with a high forecast of $120.00 and a low forecast of $71.00. The average price target represents a 3.79% change from the last price of $89.44.

I would think that Nike would still experiencing a slight downside on its stock price even though market cheers the news of a new CEO to boost things up, but we have not seen any strategy yet.

Nike could still be trading lower than its last close price before its earnings.

Nike (NKE) Year-To-Date Returns

Investors sentiment have been eroded followed by the 17% loss in its stock price, so what would be important for Nike moving forward is an earnings surprise, followed by a positive outlook of how Nike would like to capture back the consumer from its rival.

There will be more to expect from the new CEO coming onboard, but in the meantime, I would think that the current stock price is still a potential buy if we have confidence of Nike coming back.

Technical Analysis - Earnings Target Move

Based on what market is expecting for a lower revenue and profit, so from the earnings target move, it is expecting to see a fall in its stock price post earnings release.

So I would think we might want to monitor the price action in today (30 Sep) trading for Nike and see how market and investors react to Nike future and also not forgetting Fed Chair Powell speech today (30 Sep).

Fed Chair might shed some light on rate cut decision and why consumer confidence is declining.

Technical Analysis - MACD and KDJ (Short Term)

From MACD, we are seeing Nike have an upside movement, and KDJ for short term looks like there is no upside room to move, but do note that earnings not beating estimates could still make a stock move higher if the outlook is positive and sits well with investors.

So I would think it is better to monitor and see how Nike is trading with investors confidence coming back or not.

Summary

I would think that Nike investors are still looking for the strategy to overcome the challenges posed by its rival, and also how Nike would be re-capturing some of its market share.

So what I would look out for this earnings is the revenue breakdown and also the outlook guidance from Nike.

Appreciate if you could share your thoughts in the comment section whether you think Nike would be able to turn around with the new CEO with better guidance ahead.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.