Nike Inc, the athletic apparel and footwear giant, is gearing up to unveil its fiscal Q4 ’24 earnings, poised to be revealed after market close next Thursday night, June 27th.
Despite its stock’s plunge of around 50% from late November 2021 highs of $179, Nike has been holding steady in the high $80s to low $90s range since mid-April.
Sell-side consensus projects $0.84 in earnings per share, $1.54 billion in operating income, and $12.85 billion in revenue, reflecting an anticipated year-over-year growth of 27%, 26%, and a flat 0% revenue growth, respectively.
The company has encountered operational challenges in recent times, with operating income growth only occurring in 2 out of the last 11 quarters, mainly attributed to past inventory issues which have now been resolved.
Given Nike’s struggle since the onset of the pandemic, its financials have displayed modest growth patterns since November ’21, with revenue up by 5%, while operating income and earnings per share have experienced dips of 8% and 1% respectively.
Analysts point to a possible stagnation in Nike’s brand appeal and footwear offerings, a concern that the CEO aims to revitalize.
Charting the Stock’s Trajectory:
Analysis of Nike’s monthly stock chart indicates a potential break above $100 could pave the way for a push towards the 50-month moving average at approximately $120 – $121 per share.
Interestingly, the chart underscores that Nike is currently more oversold on a monthly basis than it was during the 2008 financial crisis.
However, underlying concerns about the brand’s fatigue may cap significant upward movement, with the stock’s price floor seen around the $80 – $82 range.
Evaluating the Financial Landscape:
Nike anticipates a mere 1% revenue growth for both fiscal ’24 and ’25, a trend that has led to less optimistic EPS projections for the coming year.
The upcoming fiscal ’25 guidance announcement will be pivotal, with current estimates pegging earnings per share at $3.88 on $52.1 billion in revenue. Investors may find the growth outlook uninspiring given the stock’s current valuation.
Trading at 24 times the expected EPS on nominal revenue expansion, Nike’s valuation fails to excite potential buyers, being valued at about 2.5 times revenue and 18 – 21 times cash-flow and free-cash-flow.
Final Thoughts:
If Nike continues to deliver lackluster revenue growth as per market expectations, two consecutive years of 1% growth signal underlying challenges for the brand. Analysts are keenly awaiting the fiscal ’25 guidance to ascertain the company’s trajectory.
The successful mitigation of inventory issues over recent quarters has alleviated pressures on cash flow, although China’s significant contribution to Nike’s earnings remains a point of interest and concern for investors.
Observing the financial horizon cautiously, there appears to be little to prompt an aggressive surge in Nike investment. Patience and prudence in monitoring the company’s performance seem advisable.
Moreover, the absence of a cash-flow statement in Nike’s earnings reports, contrasting with contemporary disclosure norms, raises questions about transparency and investor communication.
Investors await Nike’s earnings release, keeping an eye on the figures to glean insights into the company’s financial health and future potential.
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Disclaimer: The information presented is opinion-based and not financial advice. Past performance is not indicative of future outcomes. Investment decisions carry inherent risks.
