Nike NKE will report on their earnings for the first quarter of fiscal year 2023 on Thursday after market close.
For those still holding onto 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 revenue is tightly tied to economic fluctuations.
With more than half of its earnings generated outside the US, global political and economic events land like lightning strikes over Nike’s performance.
Disruptions in China due to ongoing COVID-19 lockdowns impacted sales. Rising energy costs in Europe linked to the Ukraine war could also impact sales this winter as the cost of living rises.
On Monday, analysts at Telsey Advisory Group lowered their 12-month price target for Nike to $125 from $130. The stock closed at $98.70 on Wednesday.
The company is forecasting earnings of 93 cents per share versus the FactSet consensus of 92 cents.
A stronger US dollar is a reason to worry as foreign ground operations become less cost effective. That and a slowing consumer environment globally prompted Telsey to lower its price target ahead of earnings.
“Nike is prudent and has taken a cautious approach given the lack of visibility in China, cost pressures and the uncertain economic environment,” the analysts said.
The company remains encouraged by Nike’s product innovation pipeline, healthy demand, customer connectivity through digital and the underlying gross margin improvement driven by the shift to direct-to-consumer.
Analysts expect Nike to outperform the market. With lockdowns in China likely to ease in the coming quarters, Telsey says things should improve in the second half of 2023.
All in all, despite a general downturn, Nike’s business model continues to show solid fundamentals, with a…
