TLDR
- Nike stock is down 44% this year and has fallen for two straight months.
- The company reports fiscal Q1 earnings after the bell on Thursday.
- Short interest has hit a record high of about 87 million shares sold short.
- Jefferies expects results above Wall Street’s current forecasts.
- Nike is pulling back on discounts and third-party sales in China to protect its brand.
Nike stock has lost 44% of its value this year. It ticked up 0.3% overnight ahead of Thursday’s report, but the stock has still fallen for two straight months in a row.
The company reports fiscal first-quarter earnings after the market closes on Thursday. Wall Street expects earnings of 44 cents per share, down from the year-ago quarter.
Analysts also expect revenue to fall 3.4% to $11.3 billion. That would mark another quarter of declining sales for the sportswear giant.
Nike’s stock is down more than 77% from its November 2021 peak. It touched its lowest level in over a decade this past summer.
Only about a quarter of the 44 analysts tracked by FactSet are bullish on the stock right now. Years of turnaround attempts have not convinced most of Wall Street yet.
A Record Bet Against Nike
Short interest in Nike has climbed to a record high. Roughly 87 million shares are currently sold short, according to S3 Partners.
That is up from about 32 million shares a year ago. Short interest as a share of Nike’s float has jumped from under 3% to above 7%.
A heavy short position means a strong earnings beat could trigger a short squeeze. That would push the stock higher as short sellers rush to buy back stock and cover their bets.
Retail traders on Stocktwits remain upbeat heading into the report. Many see the current price as a buying opportunity rather than a reason to stay away.
Jefferies has a more optimistic earnings view than the broader Street. The firm expects Nike to post revenue near $11.5 billion and adjusted earnings of 48 cents per share.
Both figures sit above the current consensus numbers. If Jefferies is right, Nike could clear a low bar set by other analysts.
Nike’s China Problem
Nike has struggled for years with weaker demand in China. The region has been a persistent drag on overall sales growth.
Under CEO Elliott Hill, Nike is cutting back on frequent discounts there. The company wants to protect its premium pricing and image.
Nike is also reducing how much it sells through third-party online retailers in China. Those retailers currently account for a high-teens percentage of the company’s China sales, so the shift carries some risk.
The broader turnaround has also been hurt by weaker ties with retail partners and softer demand for lifestyle products. New product launches have failed to generate much buzz, and the brand lacks a modern equivalent to Michael Jordan’s star power from past decades.
Fashion trends have also moved away from athletic wear toward dressier styles. That shift has added more competition for Nike’s core business.
Technical data shows just how beaten down the stock has become. Koyfin data shows Nike’s monthly relative strength index has dropped to its weakest level since 1984, a sign the stock is heavily oversold.
Nike reports results after the close on Thursday, and investors will be watching for any sign that the turnaround is gaining ground.
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