Nike's October Earnings: A Risky Bet or Opportunity?
Nike's stock has been facing significant challenges in recent years, with CEO Elliott Hill leading the company for nearly two years to turn things around. As the company heads into its first-quarter earnings report on October 1, investors may be wondering if it's a good time to buy.
The apparel company is going up against weak prior-year comparables and has a low valuation, which could make it an opportune time to invest. However, buying a stock with earnings on deck can be a risky proposition, especially considering Nike's history of declining after its earnings reports.
In the past three years, Nike's stock has often fallen significantly after earnings, with some declines reaching as high as 10%. While it's possible that the company may deliver stronger growth due to its struggling business in recent years, investors shouldn't expect a big surprise or turnaround anytime soon.
Nike's stock has lost around half its value over the past 12 months and is currently trading at 21 times its estimated future earnings. This puts it above the average stock on the S&P 500, which trades at 20 times projected future profits. With a wait-and-see approach still making sense for Nike's stock, investors may want to hold off until there's more convincing evidence of the company's turnaround efforts.