Nike Stock Earnings in The Midst of Russia-Ukraine War
In general, Nike stock seems to into the category of “stocks that just keep on winning”. This is mainly because Nike is one of the world’s most valuable brands and just keeps getting more popular. By this point, it has massive global appeal to a huge audience. It has also signed exclusive apparel deals with both the NBA and NFL. Even in spite of the coronavirus pandemic, Nike’s stock rose over 40% in 2020.
However, with the new conflict in Ukraine, investors could finally be souring on Nike. Escalation of this conflict could have massive implications on Nike’s sales and supply chain. This is especially true since Europe is Nike’s 2nd biggest market.
As I write this, the stock is down 30% from its all-time high. Nike has not yet made an official comment on the Ukraine/Russian conflict. However, it has shut down stores in Russia as it cannot deliver to the area.
Why is This Earnings Report So Important?
Nike is set to announce earnings on March 21, 2022. Investors expect revenue of $10.64 billion and EPS of 0.72. Earnings reports are also important because they provide investors with critical updates about the company’s business. For Nike, this report in particular will have huge implications on its stock price.
This is mostly because Nike should also provide guidance for the rest of this year. This will give investors critical insight into how much damage the Ukraine conflict could do.
Let’s take a look at how Nike might do over the coming months.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
Nike (NYSE: NKE) Stock Forecast
Nike (NYSE: NKE) is the world’s largest supplier that sells footwear, apparel and sports equipment. It was founded in 1964 and is headquartered in Beaverton, Oregon. In 2020, the Nike “Swoosh” brand was valued at 32 billion. Nike is a member of the Dow Jones Industrial Average, making it one of the 30 most valuable companies in the U.S.
- Increased Competition: In recent years, competitors like On Running (NYSE: ONON) and Allbirds (Nasdaq: BIRD) have grown in popularity. More recently, Lululemon announced that it will be launching a shoe as well.
- Closing stores in Russia: Nike is one of several brands to temporarily close all Russian stores. This report came after it had already shut down online purchases in the country.
- Recently announced a quarterly dividend of $0.305 per share.
Let’s take a look at how these announcements impacted Nike stock.
Nike Stock Predictions
Nike has done a good job of navigating these rocky past two years. In 2020, it stayed on top of the COVID-19 crisis and the stock rose 40%. In 2021, it continued to maintain its supply chain and the stock rose 7%. Unfortunately, 2022 has not been good to Nike so far. Its stock is down approximately 30% to start the year. However, Nike is far from the only company struggling. This drawback could be related to issues like higher-than-expected inflation and rising interest rates.
In its last earnings report (Q2 FY2022), Nike reported revenue of $11.4 billion. This was up 1% year-over-year (YOY). It also reported a net income of $1.34 billion, which was up 6.8% YOY.
With that said, let’s take a look at whether you should buy Nike stock or not.
Is Nike A Buy? Potential Upsides
Even under normal circumstances, it’s very difficult to predict what will happen in the world. However, in recent years, it’s basically been impossible. That’s because there are so many macroeconomic events going on that it’s hard to keep track. The world’s “uncertainty meter” hasn’t been this high since the 2008 Financial Crisis.
Here are a few examples of massive events that are currently unfolding:
- Will Putin escalate the war in Ukraine? Could this spark WW3?
- What role will Russian sanctions play on the already-damaged global supply chain?
- Will another COVID-19 strain emerge?
- Inflation is the highest it’s been in decades. Will this squash consumer spending and hurt the economy?
- Will the stock market crash when the Fed raises interest rates?
- Gas prices are at their highest ever. What impact will this have on the economy?
Regardless of which stock you are looking at right now, the short-term will be filled with uncertainty. Keep this in mind when making decisions.
With that said, Nike has done a good job of navigating crises so far. If it overcame pandemic lockdowns then it should be able to battle through the Ukraine/Russia conflict.
Looking past these immediate short-term issues, Nike’s future still looks strong. It has one of the world’s most valuable brands and has dominated the industry for decades. Even some of its subsidiary brands Jordan are more valuable than entire companies. On top of that, Nike supplies the entire NBA, NFL and nearly every single major NCAA team.
If you are a long-term investor, this could even be a great time to buy Nike stock at a discount.
For what it’s worth, Nike has also beat its last four earnings expectations. In two cases, it beat by as much as 32% and 84%.
So, what about the downsides?
Is Nike A Buy? Potential Downsides
The biggest risk of Nike stock right now is short-term volatility. There is a lot of uncertainty about what may happen with Ukraine/Russia. Depending on how these scenarios play out, it could have a huge impact on Nike’s business. For example, the invasion could damage the company’s sales in Europe, where 25% of Nike’s revenues come from.
Additionally, Nike also has to deal with war-related sanctions on Moscow. These sanctions are changing week to week but so far include airspace bans and shipping route changes. All of this presents just another challenge for East-West supply chains. If this conflict extends for months or even years, it could damage Nike’s sales on a global level
Apart from the Ukraine conflict, there are still other risks to consider. For example, inflationary could be a huge issue for a retailer like Nike. Rising inflation could squeeze Nike’s profit margins and reduce consumer spending.
Finally, a longer-term question is if Nike will stay popular with younger generations. In recent years, companies like Allbirds and On Running have emerged as competitors. So far, neither of these companies has really come close to being a real threat. However, they are both popular with younger demographics.
Nike is a company that was started in 1964. So far, it’s done an incredible job maintaining popularity throughout generations. However, apparel and fashion are notoriously fickle. Over the next few years, Gen Z will continue to enter the workforce and start earning income. Will these shoppers be as loyal to Nike as older ones were? Or will they prefer to rock Allbirds, Clouds, or Lulu shoes?
I hope that you’ve found this Nike stock forecast to be valuable! As usual, please base all investment decisions on your own due diligence and risk tolerance.