Nike (NKE) reports their fiscal Q2 earnings tomorrow after the close. The options market if implying about a 5% one day move in either direction, which is basically in line with the 4 qtr avg one day move.
NKE has been a massive out-performer in 2014, up almost 19%, despite the stock’s recent 6.5% declines since nearly touching $100 on Nov 28th when it made a new all time high:
The stock was obviously a bit overbought heading into December with the World Cup and the most of the NFL season in the rear-view mirror. On a longer term basis the definitive breakout above $80 in late Sept on better than expected results in guidance should serve as meaningful technical support for some time:
Options prices have risen steadily into tomorrow night’s earnings with 30 day at the money implied volatility making new 52 week highs today, well above prior pre-earnings levels:
Sentiment on the stock remains fairly bullish with 22 Buys and 12 Hold ratings, and NO Sells with the average 12 month price target around $102. Short interest is at about 1% of the float.
One of the few points of contention with NKE is the premium valuation, trading at about 25x this years earnings that are expected to grow 21%. On a trailing basis, the stock’s P/E is nearing levels not seen since the run up to the internet bubble:
This could be one reason why vol is ticking up in front of tomorrow’s print. If the company were to offer downbeat guidance, causing analysts to take down fiscal 2015 estimates, the stock would clearly see a re-rating and could easily out-perform the implied move to the downside. The upside downside risk reward does not seem to be in equilibrium as a breakout to new highs (above 100) seems like a long shot even on a beat and raise.