Why Nike (NKE) Stock Is Nosediving

Jabin Bastian /
2024/03/22 3:23 pm EDT

What Happened:

Shares of athletic apparel brand Nike (NYSE:NKE) fell 8.7% in the morning session after the company reported Q3'2024 results and provided underwhelming guidance for the full year. Full-year revenue is expected to grow approximately 1%, showing little improvement from the guidance provided in the previous quarter. Readers will recall that in the last quarter, the sales outlook for the rest of the fiscal year was impacted by macro headwinds mostly concentrated in Greater China and EMEA. It appears little has changed since the guidance. In addition, while the revenue and EPS growth outlook for FY'2025 is anticipated to improve, revenue in the first half of the fiscal year is expected to be down low single digit. 

On the other hand, Nike blew past analysts' EPS expectations during the quarter. Its revenue and gross margin narrowly outperformed Wall Street's estimates, driven by strong sales of its Nike-branded goods (this excludes Converse, whose revenue dropped 20% on a constant currency basis). Specifically, Nike-branded equipment sales were up 21% year-on-year. Overall, it was a mixed but weaker quarter, given the underwhelming guidance.

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What is the market telling us:

Nike's shares are somewhat volatile and over the last year have had 3 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.

Nike is down 11.3% since the beginning of the year, and at $94.47 per share it is trading 26.1% below its 52-week high of $127.92 from April 2023. Investors who bought $1,000 worth of Nike's shares 5 years ago would now be looking at an investment worth $1,149.

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