Shares of athletic gear specialist Nike (NKE) have put in a solid performance in the past few months. Nike stock has enjoyed a steady rally along support at its 10- and 20-day moving averages since April, though the rally appears to have stalled in the $83 region lately, with NKE being met with rejection in the area.
But Nike has a chance to inject a bit of rally fuel this week, as the company is slated to release its first-quarter earnings report after the close on Thursday.
Digging into the numbers, Wall Street is anticipating a profit of 88 cents per share from Nike, up a little more than 2% from the 86 cents the company reported in the year-ago quarter. Revenue, meanwhile, is seen jumping 12% to $7.83 billion.
Expectations might be a bit higher among some on Wall Street, however. According to EarningsWhisper.com, the whisper number for Nike earnings arrives 3 cents higher at 91 cents per share.
There is some lingering doubt within the brokerage community, however. For instance, Thomson/First Call reports that 21 of the 28 analysts following NKE rate the shares a “hold” or worse. Additionally, the consensus 12-month price target of $88 represents a measly premium of only about 9% to Monday’s close at $80.71.
Options traders are also somewhat blasé when it comes to Nike stock’s prospects ahead of the company’s report.
The put/call ratio for the front three months of options arrives at 0.99, meaning that call open interest and put open interest are in near parity ahead of the event. Since calls typically are more prevalent heading into a company’s earnings report, this lack of enthusiasm has a distinct bearish feel to it.
Peak call open interest totals a hefty 5,643 contracts at the overhead in-the-money Oct $80 strike, while peak put open interest numbers 5,142 contracts at the deep out-of-the-money Oct $70 strike. Other notable accumulations include the 4,743 contracts open at the Oct $82.50 call, and the 4,802 puts residing at the Oct $75 strike.
Click to Enlarge Weekly September option implieds for Nike stock are pricing in a post-earnings move of about 4%. This places the upper bound near $84.38, while the lower bound lies at $77.62.
Bull Call Spreads on Nike Stock
Those traders looking for NKE to receive a post-earnings boost might want to consider entering a bull call spread.
The Oct $80/$82.50 bull call spread could potentially be quite profitable. At last check, this spread was last offered at $1.10, or $110 per pair of contracts.
Breakeven lies at $81.07, while a maximum profit of $1.40, or $140 per pair of contracts, is possible if NKE closes at or above $82.50 when October options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
