Nike stock price will be in the spotlight next week as the highly embattled company publishes its financial results. These numbers will come at a time when its shares have plunged by over 54% from the highest point in 2021.
Nike’s growth has stalled
Nike, one of the best names in the apparel industry, is going through a difficult phase a its growth slows and as competition rises.
Its annual revenue jumped from over $37.4 billion in 2019 to over $51.2 billion in 2022. The trajectory then slowed a year later as its revenue rose to just $51.3 billion a year later.
Nike’s business is struggling as competition from companies like On Holding and Adidas has risen. On top of that, weak consumer spending in China has contributed to the slowdown.
All this has made Nike one of the worst-performing companies in the Dow Jones index. There are rising odds that it will be removed from that list if the performance continues.
The most recent results showed that Nike’s business deteriorated in the last quarter. Revenue retreated by 10% in its first quarter to $11.6 billion. This slowdown was spread across its business segments.
Nike Direct sales fell by 10% to $11.6 billion, while its wholesale revenues dropped by 8% to $4.7 billion.
This slowdown is a contrast to what Adidas, the giant German company performed during the quarter. Its sales rose by 10%, with its numbers expanding across all markets, channels, and divisions.
On Holding, another company in the industry, also reported strong numbers as its net sales jumped by 32.3% to over CHF 635 million. Its growth was driven by its direct-to-consumer business.
Therefore, these numbers mean that Nike’s problems are mostly internal, which explains why its stock has underperformed. Adidas stock has jumped by 24%, while On Holding has risen by over 112%.
Nike is also done worse than Under Armour, whose shares have fallen by about 4% this year as it implements its turnaround.
Nike’s results also showed that its profitability dipped during the quarter. Its net income fell by 28% to $1.1 billion, and the company withdrew its guidance.
NKE Earnings ahead
The next catalyst for the Nike stock price will be its earnings, which will come out next week. Analysts expect that its revenue dropped by 9.1% in the last quarter to $12.16 billion, continuing a trend that has been going on for a while.
Analysts also expect that its forward guidance for the next quarter will be revenues of $11.5 billion. For the year, they see its revenues falling by 7.7% to $47.4 billion.
On the positive side, analysts expect that Nike’s revenue growth will resume in the next financial year when its revenue will grow to almost $5o billion.
Another positive is that analysts expect that Nike’s stock is relatively undervalued. The average stock target is $90.45, higher than the current $77.25. The general view is that Nike is a strong brand that will ultimately recover.
Read more: Can Nike’s new CEO and Jordan anniversary turn around its stock performance?
Nike stock price forecast
The weekly chart shows that the NKE share price has been in a strong bearish trend in the past few years. It has remained below the descending trendline that connects its highest levels since November 2021.
The stock has formed a descending triangle pattern and a death cross pattern. It is also sitting at the lower side of the triangle. Therefore, there is a likelihood that the stock will have a bearish breakdown as sellers target the key support at $60.
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