Nike Beat Earnings 8 Quarters in a Row and the Stock Fell 60%

Nike has beaten earnings eight quarters in a row. The stock is down 60% over those same eight quarters. Down 80% from 2021 peaks. The market cap from 264 billion to 57 billion. Big drop there. Nike is the worst stock in the Dow this year and at a 12-year low. On September 21st, they got kicked out of the S&P 100 due to market cap loss, but revenues flat at 46.4 4 billion. So, the business didn't break, the multiple did. All that said, Nike has beaten expectations each of the past eight quarters, eight for eight, but $89 a share down to $36 a share while doing it. So, the street quit trying to agree. Jeff has a target of $75 a share. Bank of America has $30, a huge disparity on the same stock, and it's trading near the bottom of the range. Now, let's talk options. Across those eight prints, the market priced a 7.39% move and Nike delivered an 8.12% move on average, blowing through its own implied move half the time. Thursday, it's asking 7.26% from the options market, which feels cheap again. But direction is the trap. It feels like since Nike fell the day after the announcement in five of eight quarters and was lower a week later in six of eight quarters. Beat the number, sell the stock. So, is 7.26% too cheap, or has the market just stopped caring what Nike earns? Let's check it out on today's edition of Options Math Check. So, we're in the platform and I've got a chart of the Nike stock price, a yearly chart. So, we're going way back here into the 90s. That's fun. We have data in the 90s when the Bulls were just taking over the world. And now we've got uh a huge run up in Nike all the way up to the peak in 2021. And ever since it's just been a disaster for the stock. Five straight losing years going from $170 a share all the way down to 35. And we haven't seen this level since 2014, which again is a 12-year low. So the question is when is it going to stop this Nike bleedout that we've seen? Uh, and when you look at a daily chart and we focus on this year, you can still see it's just been really tough sledding for the stock. I mean, there's been no sort of momentum to the upside at all, especially when you consider that this stock was trading for around $70 a share when we opened the year uh this year. So, couple of gap downs after earnings. Like literally, these gaps are earnings announcements. You can see them clear as day. And here we are sitting at the lows of 3577. And again, Nike is still in the S&P 500, but they got booted from the S&P 100 due to lack of market cap or loss of market cap, I should say. We're sitting at 53 billion right now, market cap, which is crazy low. And uh there's still trouble on the horizon for Nike. I mean, it's one of those products that has always been a household brand name in the United States. Um, and you know, that's one thing they can always lean on, but at the end of the day, these public companies, they've got international markets, they've got tariff issues overseas, uh, Nike specifically. And all that said, we've got a October 1st earnings announcement after the close, which is Thursday. And we've got a pretty high implied volatility, 35 point implied uh, $35 stock with a $2.90 implied move for this week. So, that checks in around 10% of the stock price, just shy of it. So, uh, nothing too extreme, but not low. I mean, $3 of an implied move over the next three days on a $35 stock is nothing to scoff at. And that's especially true when you look at the 3-day cycle at 291 and you weigh that against November or even December at the end of the year. December only has an implied move of $4.87 87 with a 46% implied volatility compared to this week's $2.90 move against 116% implied volatility. So basically what this tells me is all of the weight uh for the really like a huge chunk of the implied move for the rest of the year in Nike is priced into this week's earnings announcement with a $3 implied move this week relative to a $4 and change implied move through the end of the year 80 days away. So, tons of emphasis on this earnings announcement. And I think it's totally fair because something's got to give here with Nike or uh it could spell even more trouble through the end of the year. But regardless, let's take a look at the options markets and let's take a look at the low price point of 30. I mean, markets are basically zero bid here. I mean, they're 4centent 5-cent bid ass spread uh with a 4% probability of being in the money. So that's a two standard deviation range to the downside. If we do get that move down to 30 or below, which was the lower end of the price target range, of course, 75 is out of reach with this week's implied volatility. But I think it's interesting to still look at the difference between the 30 strike, which is five points out of the money to the downside, basically worthless. But then you look at the upside, and you look at the 40 strike, and the 40 strike still has plenty of premium. So there is absolute call skew in this market. And again, it feels like one of those situations where it's been beaten up so much the market doesn't believe that Nike is going to go out of business. And for that reason, we're sitting at 12-year lows. It kind of feels like the lower this price gets, the more call skew we're going to see if we assume that Nike is not going to go out of business. uh if we if that starts to shift and let's say they sell off again, you might still you might see some more put premium coming to the market relative to the calls. But still I I'm not surprised to see massive call skew here, five points out of the money on either side when you've got a 30cent market on the upside and a 4cent market on the downside. Basically equidistent and out of the money. So market's hoping and pricing in a lot more premium and velocity of risk to be to the upside, which I think is fair considering Nike uh was just removed from the S&P 100 and has really had a tough time over the last 5 years or so. But let's check out the end of the year and let's see if we can get any kind of information around that 30 print on the low. Okay, 75 cents. So, tons of premium there relative to this week, but uh 23% probability that we arrive there at the expiration in December, which is about five points out of the money. We are seeing uh some premium still priced into the upside, but not nearly as much as what we just saw with the earnings announcement. When we look at the 3040 split here, the 30 strike to the downside at the end of the year, trading for 70 cents, almost 80 cents, and then the upside about a $150. So, a lot less aggressive skew as you go further out in time through the end of the year, which I think makes sense because if they fail in this earnings announcement, I think you could see that 30 uh price come into play. But it looks like the market's prepping for velocity risk to be to the upside if they have some kind of announcement that really skyrockets this thing and starts to help it recover from the lows. But still, by the end of this year, not sure we're getting that call of 75 um or 70 even. And I mean these options are a 1% probability based on current implied volatility. And current implied volatility is still decently high. Uh when you look at Ivy rank at 75% which tells you that this 30-day aggregate IV of around 50% is pretty high for Nike. So we'll see what happens. But I think it's going to be a really important earnings announcement for Nike. And I think that is expressed pretty cleanly with the implied move for three days about $3. Uh and then the implied move for the next 80 days in December less than $5. So huge ratio for this week's earnings announcement. And again, I think it makes all the sense in the world. And I think all eyes will be on Nike come October 1st after the market closes. But let me know how you're trading this thing. I've got a leap option to the upside. I basically was like, "Hey, if we're at 12-year lows and Nike is going to go out of business, uh, I'm going to risk $100 or $200 to make that expression. I bought this for like four $400 a while ago, but this has 500 days left to expiration. So, if Nike does have a rally after earnings, this is going to pick up a lot of premium and uh maybe we can have a nice winner on our hands. But yeah, just playing the price extreme game here with a low price point in terms of the stock price. But let me know how you're trading Nike earnings. Whether you think it's going up, going down, going outside the the expected move, going inside the expected move. Let me know in the comments below. Please like this video, subscribe to the Tasty Live channel, and we'll see you on the next episode of Options Math Check.