Nike trades at all time highs ahead of earnings

Nike is due to report Q2 results after seeing its share price refresh its all-time high today, although the rally could starting running out of steam.

Charts (5)

When: Friday 18th December

Nike has managed to ride out the pandemic relatively well with sales bouncing back after initially falling at the start of the covid outbreak. In Q4 Nike posted a loss of $790 million on revenues of $6.31 billion owing to lockdowns across Europe & US, after lockdown in China. 

Digital
Q1 was much more encouraging thanks to a sharp rise in digital sales of 82% as Nike was quickly able to shift its focus to digital sales. Whilst Nike isn’t immune from the troubles faced by bricks and mortar retailers, it is driving its business in a way that surging digital sales could more than offset those declines.

China
With the Chinese economy showing strong signs of recovery, sales in China are expected to pick up too. China added 6% growth in Q1 - investors will be hoping for the trend to continue, particularly as Chinese retail sales continue to rise. 

Share buy back 
Nike could announce a resumption of its share buy back programme which was suspended in March to conserve cash. Nike upped its dividend in November. Should it resume its buyback programme this would send a strong message that management are confident in the outlook.
Finally any clues over holiday sales so far will be watched closely. Even as stores reopen strong digital trends are expected to remain highlighting the strength of the Nike brand

Expectations 
Q2 Revenue $10.55 billion (+2.2% QoQ) and EPS $0.61c (-13% QoQ) 
The figures indicate that Nike could see a jiggered path to recovery rather than a straight line higher.

Analysts expectations
Of the 28 analysts watching Nike:
Strong buy 26
Hold 2
The price target ranges from $115 - $174

Chart thoughts
Nike has surged over 43% over the past 12 months, outperforming the S&P’s 16.6% return. an impressive run hitting an all time high earlier in the month and refreshing that top today, although the rally higher does appear to be slowing..

Nike trades above its 20, 50 & 100 sma on the 4 hour chart pointing to a bullish trend. The move higher is supported by momentum, the RSI is also in bullish territory over 60, pointing northwards with still some distance to overbought territory.

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