Nike Inc is all set to report fiscal fourth quarter 2016 results after the close of trade on Tuesday. And ahead of the key event, shares broke below a key support zone, reinforcing fears that oversupply in the sporting goods market could come back to bite the stock.
Shares of Nike ended Monday at $51.89, down over 1 percent for the session.
Nike Inc Stock Precariously Poised Ahead of Earnings
NKE has been in an intermediate term down trend since hitting a high of $65 in March. Since then, every bounce in the stock has seen sellers enter, only to push prices lower.
But as long as $54 was intact, bulls still had hope. That area corresponds with the lows of February and was expected to be a strong support on the downside.
Unfortunately, Nike became a casualty to late last week’s Brexit-driven equity market turmoil, with shares comprehensively breaking below that zone. With the down trend firmly in place, aggressive traders should avoid initiating long trades until Nike manages to close above $55, which marks the last pivot high.
Nike Inc Basketball has Wall Street Split
Nike has been facing a number of issues, including softness in its basketball unit. But most analysts expect the Summer Olympics in Rio to provide catalyst for rest of year sales.
“Slower US basketball trends have been a key investor concern lately,” UBS wrote to clients on Sunday. The investment bank rates Nike shares as “buy” with a 12 month target price of $70 per share.
However, analysts at Piper Jaffrey reckon that basketball concerns “are overblown.” “We expect management to reiterate its fiscal year 2017 guidance of low teens EPS,” Piper Jaffray said in a note on Monday.
For the just ended quarter, the consensus is for earnings of 48 cents a share, down from 49 cents in the year ago period. Quarterly sales are expected to come in at around $8.30 billion, up from $7.80 billion a year ago.
According to 31 analysts polled by FactSet, shares have an average “overweight” rating, with a target price of $70.05. Nike is down 16 percent over the past three months, and a big 17 percent year to date.
In the event of fourth quarter numbers disappointing, the Nike sell-off is only going to gather steam. However, if results top expectations, traders can look to go long on a close above $55 on above average volumes.