Nike, Inc. (NASDAQ: NKE), the athletic apparel giant, stumbled on Thursday after issuing a weaker-than-expected sales forecast for the rest of its fiscal year. The company cited “more cautious consumer behaviour” and a “highly promotional environment” as headwinds impacting its growth. Despite beating analyst expectations for both EPS and revenue in its Q2, the missed revenue forecasts sent shockwaves through the market, causing the stock to plummet over 12% in pre-market trading.
Nike now expects full-year revenue to rise only 1%, down from its previous mid-single-digit percentage growth guidance. The company plans to cut $2 billion in costs over the next three years through streamlining product lines, supply chains, and management layers.
Chief Financial Officer Matthew Friend acknowledged “indications of more cautious consumer behavior around the world in an uneven macro environment.”.
Technical
The weekly chart paints a grim picture. Nike’s price action gapped down, breaking below the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), indicating a strong bearish signal. While the RSI shows a rebound from oversold territory, reaching 66.18, it could be a head-fake before another leg down.
With the price action recently gapping down lower, with a continued push lower likely to bring the $104.08 support level into play in the short-term. A break below the initial support would bring the $97.87 support level into play in the short term.
However, a share recovery could offer trading opportunities towards the resistance at $113.97. A successful break above the initial resistance would likely bring the $117.35 and $122.53 resistance levels within the bulls’ reach in the short term.
Summary
Nike’s recent stumble is undeniable. The weaker-than-expected sales forecast and bearish technical indicators suggest a continuation of the short-term sell-off. However, the company’s strong margins, strategic growth initiatives, and cost-cutting plans provide a glimmer of hope for long-term recovery. Investors with a higher risk tolerance and a long-term perspective might find value in this dip, while cautious traders might prefer to wait for a more concrete signal of a turnaround before entering the market.
Sources: TradingView, Trading Economics, Nike, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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