Nike Pre-Earnings Analysis
Nike’s quarterly earnings are expected later this week on Thursday after market close. The company is expected to post revenues of $13.4B, up from last quarter’s $12.94B, but just around same quarter last year of $13.31B. Analysts adjusted their earnings from this year with a “recession” mindset so they weren’t too optimistic on Nike being able to come in above last year’s numbers. With that in mind, we’re watching Nike’s ability, not to beat last quarter’s numbers, but to beat last year same quarter numbers. If they can do that, then buyers will likely come in to buy the stock.
We’re confident Nike will beat earnings for a few reasons. The strong dollar is the leading reason we expect Nike to beat last year’s profits. The dollar’s rise overt the Chinese Yen will give companies that outsource their manufacturing an advantage this earnings season as it will be cheaper to import. Another reason we’re bullish is last week’s retail sales report came in above expectations as consumer spending began to lift for the holidays. The consumer confidence index has also grown, reflecting a spending consumer.
Option chain analysis:
Looking at their options, we’re seeing strong open interest for the January 19th date, specifically the 130 and 135 CALLs. Implied volatility for that date is at an average of 34.84%, translating to a move of $9.85. So markets are expecting a big move from Nike, and if it does make that move, these calls will see a strong increase. Our target for the stock is 134.00-137.00 to start. Keep in mind that if Nike fails to make the move then those calls will get crushed.