Why Nike Stock Is Down By 7%

Nike Stock Falls Amid Worries About Supply Chain Problems

Shares of Nike found themselves under pressure after the company released its quarterly results. Nike reported revenue of $12.25 billion and GAAP earnings of $1.16 per share, missing analyst estimates on revenue and beating them on earnings.

Nike suffered from problems in the global supply chain, as well as from the lockdown in Vietnam. The situation with coronavirus in Vietnam remains challenging, and it looks that Nike and other players will have problems with production in Vietnam for months to come.

The market is always forward-looking, so traders ignored Nike’s earnings performance and focused on the outlook for the upcoming quarters which will be hurt by production problems and supply chain issues.

What’s Next For Nike Stock?

Analysts expect that Nike will report earnings of $4.23 per share in the current fiscal year and $5.02 per share in the next year, so the stock is trading at roughly 30 forward P/E even after the recent pullback.

While such valuation levels are typical for leading companies in today’s markets, they do not provide companies with much room for error. In Nike’s case, worries about the negative impact of supply chain problems have immediately put significant pressure on the company’s shares.

Back in August, Nike stock reached all-time high levels above $174, but it has already declined below the $150 level. It remains to be seen whether value-oriented investors and traders will rush to buy Nike stock after the pullback as the stock is not cheap while earnings estimates have been trending lower in recent weeks. In fact, they may continue to move lower as analysts adjust their models to the new reality where supply chain problems persist for many months. In this environment, Nike stock will certainly need more upside catalysts to break the current downside trend and return to growth.

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This article was originally posted on FX Empire

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