Nike stock is down 40% this year despite strong performance: what will today’s results reveal? – Nike (NYSE: NKE)


Nike NKE will release its results for the first fiscal quarter of 2023 on Thursday after the market closes.

For those who still hold Nike shares, the results will show where the sportswear giant stands after losing 45% of its market value since November 2021.

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Ripple Effects of Global Instability: As a staple of the middle class, Nike’s income is closely tied to economic fluctuations.

With more than half of its profit creation coming from outside the United States, global political and economic events strike Nike’s performance like lightning.

Disruptions in China due to ongoing COVID-19 lockdowns have affected sales. Rising energy costs in Europe associated with the war in Ukraine could also affect sales this winter as the cost of living rises.

On Monday, analysts at Telsey Advisory Group lowered their 12-month price target for Nike from $130 to $125. The stock closed at $98.70 on Wednesday.

The company is forecasting earnings of 93 cents per share against a FactSet consensus of 92 cents.

A stronger US dollar is cause for concern as operations on foreign soil become less profitable. This, coupled with a slowing consumer environment around the world, led Telsey to cut the price target ahead of earnings.

“Nike is cautious and has taken a cautious approach given the lack of visibility on China, cost pressures and the uncertain economic environment,” the analysts said.

The company remains encouraged by Nike’s pipeline of product innovations, healthy demand, customer connectivity through digital, and underlying gross margin improvements from the shift to direct-to-consumer.

Analysts expect Nike to outperform the market. While lockdowns in China are likely to ease over the next few quarters, the situation should improve around the second half of 2023, according to Telsey.

Overall, Nike’s business model continues to show strong fundamentals despite a general slowdown, with a moderate to positive medium-term outlook.

Market fix? Nike’s loss in value marks one of the steepest declines among large-cap companies in the past year.

For Seeking Alpha’s Logan Kane, Nike’s business model continues to be as strong as ever, with a bright future ahead of it.

Nike’s profitable business of selling each shoe wholesale at roughly twice its manufacturing costs has seen even greater success with the advent of e-commerce, which has allowed the company to cut out middlemen and sell directly to consumers.

Kane said the massive drop in Nike’s valuation was the result of being overvalued late last year. The stock is now closer to the company’s fair value, he said.

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