Nike Stock Gets A Rude Awakening As Technicals Point To More Weakness Ahead Of Earnings

Nike (NYSE:NKE) stock continued its downward spiral this month, dropping to its lowest level since September 2024. It has plunged from $178 in 2021 to $40 today, and analysts expect more downside ahead of its quarterly results on Tuesday. 

Analysts Have Downgraded NKE Stock Recently

In a recent note, Stifel Nicolaus lowered the Nike stock target from $56 to $50, while Deutsche Bank’s Krisztina Katai slashed from $51 to $43. Oppenheimer’s Brian Nagel and BTIG’s Robert Drbul cut their targets to $60 and $55, respectively. 

The general view among analysts is that Nike’s business is facing major challenges and that its turnaround strategy is taking time to generate returns. 

Analysts expect the upcoming results to show that its revenue dropped by 2.19% in the quarter to $10.85 billion. They also expect the annual revenue to drop by 0.08% to $46.27 billion. 

At the same time, in a recent note, an Evercore analyst warned that the company was still overvalued after the strong sell-off. It trades at a forward price-to-earnings ratio of 27, higher than the consumer discretionary average of 17. It is more expensive than companies like Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU) that are seeing strong revenue and profitability growth.

Nike has been working on a turnaround strategy in the past two years, a move aimed at returning it to growth. This approach includes approaches like embracing a return to a sport-first identity, increasing its innovation, improving its inventory, and rebuilding its partnerships with wholesalers and retailers.

This strategy, however, is happening at a time when competition in the industry is rising. Also, it is contending with Donald Trump’s tariffs on imported goods, a notable thing since it makes its products in Asia. 

Most recently, the company has seen higher costs because of Trump’s war in Iran that led to higher energy prices.

Nike Stock May Dip Further After Earnings

The daily chart shows that the NKE stock made a bearish breakout that pushed it to the lowest level in years. It moved below the crucial support level of $41.95, the lower side of the horizontal channel. 

By dropping that level below, the stock invalidated the island reversal pattern. This is a pattern that forms after a big gap, which, in this case, happened on April 1 after it released its Q3 earnings. It has also formed a small head and shoulders pattern, pointing to further downside, potentially to $35.

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