Nike earnings preview: can the stock finally rise like a phoenix

Nike earnings preview: can the stock finally rise like a phoenix

Equities 10 minutes to read
Koen Hoorelbeke

Investment and Options Strategist

Summary:  Nike’s upcoming earnings on December 19 will be a pivotal test as the company faces weak demand, margin pressures, and rising competition, while new CEO Elliott Hill takes the helm.


Nike (NYSE: NKE) is at a crossroads. With shares down nearly 29% year-to-date, the sportswear giant has underperformed major indices and competitors like Adidas and VF Corp. As the company prepares to report earnings on December 19, 2024, investors are asking the same question posed earlier this year: can Nike “rise like a phoenix” from its struggles?

That question, raised in a previous analysis, remains as relevant as ever. Now, with fresh challenges—including a new CEO, Elliott Hill, taking the reins—Nike faces a critical moment to prove whether it can stabilize its business and reignite growth.

    With much at stake, here’s what investors need to know ahead of this pivotal earnings report.


    Nike’s struggles: a quick recap

    Over the past year, Nike has grappled with several significant challenges:

    • Weak consumer demand: Economic uncertainty has softened discretionary spending, particularly in North America and China—two of Nike’s most critical markets.
    • Inventory pressures: A buildup of excess inventory forced Nike to implement steep markdowns, putting pressure on gross margins.
    • Intensifying competition: Rivals such as Adidas and Puma are gaining market share, while smaller, trend-driven brands are resonating with younger consumers, challenging Nike’s dominance in the athleisure space.

    Despite these obstacles, Nike’s long-term potential remains strong. The company’s global brand recognition and focus on digital transformation continue to support optimism about its future.

    The recent appointment of Elliott Hill as CEO introduces a new dimension to Nike’s recovery story. Hill, a company veteran with deep experience in global product strategy and consumer engagement, replaces John Donahoe. Investors will look closely at Hill’s leadership style and strategic vision for navigating Nike through these challenges.


    Analyst expectations: muted, but with upside potential

    Analysts have tempered their expectations for Nike’s upcoming earnings, reflecting the company’s ongoing challenges:

    • Revenue: Expected to reach $12.13 billion, representing a 9% decline year-over-year from $13.39 billion.
    • Earnings per share (EPS): Forecast at $0.64, down from $1.03 in the same quarter last year.

    The decline in both metrics highlights persistent margin pressures caused by inventory markdowns and weak demand.

    Recent analyst adjustments signal short-term caution. Piper Sandler lowered its price target to $72, citing sluggish sales trends, while UBS cut its target to $80 but maintained a “neutral” stance. However, the broader analyst consensus is mixed: the average price target of $89.80 implies approximately 16% upside from Nike’s current price of around $77.


    Key areas to watch this quarter

    Nike’s ability to signal a recovery will depend on the following critical areas:

    1. Sales performance in key regions
      • North America: Nike’s largest market has struggled with weak consumer spending. Stabilization here would be a positive sign for investors.
      • China: The region remains vital to Nike’s long-term growth, but a slower-than-expected recovery has been a drag on results. Signs of improvement would be a meaningful catalyst for sentiment.
    2. Margins and inventory management
      • Nike’s margins have been under pressure due to steep discounting. Investors will watch closely for signs of gross margin stabilization.
      • Progress in reducing inventory levels could ease markdown pressures and set the stage for improved profitability.
    3. Digital and direct-to-consumer (DTC) growth
      Nike’s digital transformation remains a bright spot. Growth in Nike Direct and digital platforms like the SNKRS app could help offset weakness in traditional wholesale channels.

    4. Leadership tone and forward guidance
      With Elliott Hill newly at the helm, management’s commentary on the earnings call will be crucial. Investors will look for clarity on Hill’s vision for:
      • Driving growth in key regions,
      • Strengthening margins, and
      • Defending market share against rising competition.

    Competition heats up: can Nike hold its edge?

    Nike’s challenges come at a time when competitors like Adidas and Puma are gaining traction. Adidas, for instance, has shown relative stability, signaling that Nike’s rivals may be navigating current market conditions more effectively.

    Additionally, smaller, trend-focused brands are making inroads with younger consumers. Nike’s ability to balance its product innovation and cultural relevance will be critical to defending its leadership in footwear and apparel.


    What’s at stake: Nike’s moment of truth

    Nike’s upcoming earnings report is a pivotal moment for the company, especially as it transitions under new leadership. To regain investor confidence, the company must demonstrate:

    • Stabilizing sales in North America and improved performance in China,
    • Clear progress in inventory reduction and margin recovery, and
    • Continued momentum in digital and DTC sales, which are central to its growth strategy.

    With shares trading near recent lows, the stakes are high. A strong report could validate the long-term recovery thesis and reignite optimism around Nike’s future. Conversely, weak results may deepen investor concerns and prolong the stock’s underperformance.


    Conclusion: can Nike finally rise like a phoenix?

    Nike remains an iconic global brand, but it faces mounting challenges in a competitive and uncertain environment. The company’s earnings report on December 19 will provide clarity on whether Nike can stabilize its core business and position itself for future growth under the leadership of new CEO Elliott Hill.

    While expectations are muted, the potential for upside remains. For investors, this earnings report will be a defining moment in answering the lingering question: can Nike finally rise like a phoenix?

    Quarterly Outlook

    01 /

    • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

      Quarterly Outlook

      Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

      Althea Spinozzi

      Head of Fixed Income Strategy

    • Equity Outlook: Will lower rates lift all boats in equities?

      Quarterly Outlook

      Equity Outlook: Will lower rates lift all boats in equities?

      Peter Garnry

      Chief Investment Strategist

      After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    • FX Outlook: USD in limbo amid political and policy jitters

      Quarterly Outlook

      FX Outlook: USD in limbo amid political and policy jitters

      Charu Chanana

      Chief Investment Strategist

      As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
    • Macro Outlook: The US rate cut cycle has begun

      Quarterly Outlook

      Macro Outlook: The US rate cut cycle has begun

      Peter Garnry

      Chief Investment Strategist

      The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
    • Commodity Outlook: Gold and silver continue to shine bright

      Quarterly Outlook

      Commodity Outlook: Gold and silver continue to shine bright

      Ole Hansen

      Head of Commodity Strategy

    • FX: Risk-on currencies to surge against havens

      Quarterly Outlook

      FX: Risk-on currencies to surge against havens

      Charu Chanana

      Chief Investment Strategist

      Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
    • Equities: Are we blowing bubbles again

      Quarterly Outlook

      Equities: Are we blowing bubbles again

      Peter Garnry

      Chief Investment Strategist

      Explore key trends and opportunities in European equities and electrification theme as market dynami...
    • Macro: Sandcastle economics

      Quarterly Outlook

      Macro: Sandcastle economics

      Peter Garnry

      Chief Investment Strategist

      Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
    • Bonds: What to do until inflation stabilises

      Quarterly Outlook

      Bonds: What to do until inflation stabilises

      Althea Spinozzi

      Head of Fixed Income Strategy

      Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
    • Commodities: Energy and grains in focus as metals pause

      Quarterly Outlook

      Commodities: Energy and grains in focus as metals pause

      Ole Hansen

      Head of Commodity Strategy

      Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
    Disclaimer

    Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

    The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

    Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

    To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

    None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

    Please read our disclaimers:
    - Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
    - Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
    - Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

    Saxo Capital Markets (Australia) Limited
    Suite 1, Level 14, 9 Castlereagh St
    Sydney NSW 2000
    Australia

    Contact Saxo

    Select region

    Australia
    Australia

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.