Nike, Inc. (NYSE:NKE) is due to report its third fiscal quarter 2022 on March 21, but odds are against the company.
The stock has fallen by more than 22% in 2022, eclipsing the 11% average decline among its discretionary peers in the S&P 500 index. On the day the company is set to release the quarter results, the stock is down almost 2%.
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Investors are less hopeful and despite potential earnings beat, Nike may fall further in the next few days. So, what went wrong?
Soaring consumer prices have hit Nike this year and it is understandable why the stock is suffering. For a company that makes apparel products, consumers are likely to shun them whenever their pockets are hit.
As a result, Nike is suffering from dampened consumer sentiment in the wake of high inflation. Further, exposure to Eastern Europe, especially Russia has hurt sales. Earlier in the month, the sneaker maker announced a move to shut its stores in Russia which exposes the company to billions of losses.
The two events are likely to dampen Nike stock going forward. Even if the company posts estimate-beating earnings, the weak sentiment could persist. Technical indicators also suggest a potential correction.
Nike could plunge after hitting resistance at $125
Technically, NKE is emerging from an oversold bottom of $117 when the RSI touched 29. The stock rose to a resistance of $129 and is retreating again. As the weak sentiment prevails, the stock is likely to correct to the downside.
Concluding thoughts
NKE is a sell at the price of $129. This recommendation stems from the ongoing uncertainty. We recommend that investors still wait for the quarter results.
Although the results may boost the stock to the upside, we see a further drop in the medium term until the geopolitical risks and high consumer prices abate.
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