Nike Inc. (NKE) is down roughly 6% Wednesday morning after the company’s earnings day Tuesday left much to be desired in the eyes of investors.
The company is still struggling to regain its footing, and after withdrawing its full-year guidance, it’s clear that the road ahead will continue to be rocky. Here’s how the footwear brand performed in the first quarter:
- Earnings per share: 70 cents/share, down from 94 cents/share last year but ahead of the consensus for just 52 cents/share.
- Sales: $11.59 billion, a 10% drop YoY and just shy of the $11.64 billion consensus.
CFO Matthew Friend was the only executive fielding questions during the earnings call, and cited steeper-than-expected declines in traffic for Nike Direct as a catalyst for the poor performance.
This segment makes up its own physical stores and e-commerce sales, and fell 13%. Meanwhile, wholesale revenue struggled as well – down 8% year over year. Another concern for Nike was a disappointing back-to-school season, which came and went with little lift.
While there were wins elsewhere – like men’s fitness and men’s and women’s running shoes – the general consensus is that a turnaround will take time for Nike, and investors will need to stay patient.
But, the company’s decision to withdraw its full-year guidance and only give quarterly updates for the remainder of the year won’t exactly inspire much confidence.
Even looking at the short-term, the company is forecasting an 8-10% drop in Q2 sales. The investor day has been postponed as well, as it seems the company wants to connect with employees and teams to come up with better answers to what will likely be tough questions.
In the meantime, NKE is down nearly 22% through 2024 thus far. Progress was made over the past weeks and months, as the stock has rallied more than 15% since August. But this latest update has reversed that trend.
So, where does this leave you as an investor? Should you weather the storm or cut ties with NKE and move on? We’ve found 3 things to help you make your decision one way or the other in the VectorVest system.
NKE Has Fair Upside Potential and Safety With Good Timing
VectorVest simplifies your trading strategy by delivering clear, actionable insights in just 3 ratings. This helps you win more trades with less work and stress.
The proprietary stock-rating system is based on relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation.
Better yet, you’re offered a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for NKE:
- Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This makes it a far superior indicator than the typical comparison of price to value alone. NKE has a fair RV rating of 0.90, albeit a ways below the average.
- Fair Safety: The RS rating is a risk indicator. It’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 1.03 is just above the average and deemed fair for NKE.
- Good Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. The RT rating of 1.15 is good for NKE, reflecting the rally we were watching before yesterday.
The overall VST rating of 1.05 is good for NKE, and the stock is currently rated a HOLD in the VectorVest system. But if you’re a current investor or are awaiting an opportunity to trade this stock, we encourage you to get a free stock analysis today and set yourself up for success!
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VectorVest advocates buying safe, undervalued stocks, rising in price. NKE is tumbling today after yesterday’s earnings update left much to be desired - featuring disappointing results and concern about the road ahead. The stock itself still has fair upside potential and safety with good timing, though.
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