Yesterday, J.P. Morgan told investors that Nike Inc.’s quarterly results might lead to a selloff, which caused shares of the company to go up.
On Oct. 1, at about 4:15 p.m. Eastern, Nike will report its financial data for the first quarter of its fiscal year going through August.
Before those results came out, Matthew Boss, an analyst at J.P. Morgan, said that he had put Nike’s stock on “negative catalyst watch” based on what he had learned from recent time with management and his “global fieldwork.”
The price of NKE -0.37% fell 0.8% in the morning. The drop comes after it went up 6.8% on Friday, which was the biggest one-day gain in almost two years. That was because Nike named a new CEO.
This week, Boss made his prediction a week before the results came out. It was based on cautious consumers and digital promotions in China, less traffic and more competition in Europe, the Middle East, and Africa, and more problems in North American direct-to-consumer stores because low-income consumers are tight on cash.
Boss cut his prediction for quarterly earnings per share to 48 cents, from 94 cents a year ago. This is less than the 52 cents that FactSet says the company will make.
He thinks that sales will go down 10.3% from last year, which means that sales will be $11.61 billion, less than the current FactSet estimate of $11.64 billion.
Boss said again that he still sees the stock as neutral, which is what he’s done since late June, when he lowered the rating from overweight to neutral. He dropped his price goal from $83 to $80, which is about 7% less than where prices are now.
Aside from Boss’s “negative” call, investors should be careful before reports because of what has happened in the past.
The day after Nike’s last three earnings reports, the stock dropped sharply. On June 28, after the fourth-quarter results, the stock dropped a record 20%.
According to FactSet, the company has dropped eight times, or about 9% each time, after the last 12 quarterly reports. As a whole, the stock rose by 6.8% each time it did well.
Looking ahead, Boss said he was glad that Elliott Hill, a longtime Nike employee, was hired as CEO. However, he doesn’t think Hill will be able to handle a “financial model inflection” until fiscal 2027.
The Dow Jones Industrial Average DJIA 0.15% has gone up 11.6% so far this year, while Nike’s stock has gone down 21%.
