(Bloomberg Opinion) — In an industry under pressure from runaway inflation, Nike Inc. is bearing the brunt as its exposure to the fallout from the war in Ukraine and supply-chain woes sent its shares hurtling. worst quarter of 2008.
Year-to-date, the stock is down 23%, almost twice the pace of the 12% decline in consumer discretionary in the S&P 500 Index, as higher inflation hits consumer sentiment and pocketbooks. consumers The company will report fiscal third-quarter earnings after markets close on Monday.
Shortfalls in production and returns in private transportation make the report “difficult to predict,” according to Morgan Stanley analyst Kimberly Greenberger. Even if the company delivers better-than-expected results, uncertainty around drivers of underperformance in China, potential impacts from the Russian invasion of Ukraine, and inventory levels could keep the stock range limited.
“The Q3 results are likely to settle these lingering debates, delaying any re-rating of material valuation to the Q4 earnings report (in June) or beyond,” Greenberger wrote in a note last week. Shares of Nike fell as much as 2% on Monday.
Recently, BofA equity analyst Lorena Hutchinson lowered her earnings-per-share estimates for fiscal 2022 and 2023, citing exposure to Russia and Eastern Europe, as well as covid-related volatility in China.
Still, analysts remain largely positive on Nike, which has 28 buy, 7 hold and 1 sell ratings, according to data compiled by Bloomberg. Although several analysts have cut their pre-earnings price targets, the average analyst target still implies 30% return potential for the next 12 months.
“We see a strong buying opportunity for one of our favorite long-term growth stories,” Beth Reed, an analyst at Truist Securities, wrote in a note last week.
Nike headed for biggest quarterly drop since 2008 due to supply issues
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