NKE Bearish Setup: Time to Buy Put Options?

NIKE designs, develops, and markets athletic footwear, apparel, equipment, accessories, and services worldwide. Its core brands include 'NIKE', 'Jordan', and 'Converse'. 'NIKE' and 'Jordan' branded products are primarily targeted towards specific athletic uses but are also worn casually, while 'Converse' focuses on casual sneakers, apparel, and accessories. The company sells through 'NIKE Direct' operations (owned retail stores and digital platforms) and wholesale accounts, including independent distributors and licensees. NIKE differentiates itself by leading with sport, creating innovative 'must-have' products, building deep personal consumer connections, and delivering compelling consumer experiences through digital platforms and retail. The company places considerable emphasis on innovation and high-quality construction in its product development.

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NKE's technical outlook is decidedly bearish. The stock price has experienced a significant downtrend over the past 90 days, falling from approximately $71.04 on June 30th to $61.18 as of November 4th. The price is currently below its 21-day EMA of $67.55 and well below its 50-day SMA of $70.97, confirming the bearish trend. The 200-day SMA is at $68.87. Momentum indicators also signal weakness; the MACD is negative and trending downward, with the MACD line below the signal line. The RSI of 29.13 indicates oversold conditions, which could lead to a short-term bounce. However, the ADX at 22.90 suggests a strengthening downtrend, and the Stochastic Oscillator (STOCHk) is at 4.98, indicating oversold conditions, but the overall trend is still down. The recent price action confirms the downtrend, with lower highs and lower lows. Given these factors, NKE is likely to continue its downward trajectory over the next 1–3 months, although short-term consolidation or a minor bounce is possible due to oversold conditions.

NIKE's first quarter of fiscal 2026 presents a mixed performance. Overall, `Revenues` increased slightly to $11.7 billion from $11.6 billion in the prior year. However, `Gross margin` decreased significantly by 320 basis points to 42.2%, attributed to higher discounts and increased product costs due to new tariffs. NIKE Direct revenues declined by 4% to $4.5 billion, driven by a 12% decrease in NIKE Brand Digital sales. Wholesale revenues, however, increased by 7% to $6.8 billion. Geographically, Greater China saw a revenue decrease of 9% (10% excluding currency changes), while North America increased 4%. `Cash provided by operations` decreased by $172 million to $222 million. Management acknowledges 'uncertainty and volatility' due to external factors like geopolitical dynamics and tariffs, expecting a negative impact on gross margin for fiscal 2026. The company is focused on repositioning NIKE Brand Digital, reinvesting in wholesale distribution, and increasing demand creation investment. While NIKE is taking actions to mitigate these impacts, the near-term outlook appears cautious given the margin pressures and revenue declines in key segments like NIKE Direct and Greater China.

The earnings call paints a mildly bearish picture for NIKE in the short term, driven by strategic repositioning efforts. CEO Elliott Hill acknowledged that NIKE 'lost our obsession with sport' and aims to 'reinvest in our brands to create stories that inspire.' CFO Matt Friend highlighted that Q2 revenues were down 9% on a currency-neutral basis, with gross margins declining 100 basis points to 43.6%. Looking ahead, Q3 revenues are expected to be down low double-digits, and gross margins are projected to decrease by approximately 300 to 350 basis points. These declines reflect a deliberate shift to a full-price model in NIKE Direct, reducing promotional activity and performance marketing, and liquidating excess inventory. Hill stated that 'some of these actions will have a negative impact on our near-term results,' emphasizing a long-term view focused on brand health and shareholder value. While acknowledging challenges, management expressed optimism about future growth driven by a renewed focus on sport, product innovation, and stronger relationships with wholesale partners.

Nike's financial performance presents a generally stable picture with some mixed signals. Revenue has fluctuated, starting at $13.39B in Q2 2024 and ending at $11.72B in Q1 2026, indicating recent revenue contraction. The gross profit ratio has also seen some volatility, ranging from a high of 44.86% in Q1 2025 to a low of 40.27% in Q4 2025, suggesting inconsistent profitability. Operating cash flow has varied significantly, with the most recent quarter showing $222M. Total debt has decreased slightly from $12.18B in Q2 2024 to $11.06B in Q1 2026. Overall, while Nike maintains a strong brand and significant revenue, the recent decrease in revenue and fluctuating profitability metrics warrant caution. The company's ability to maintain operating cash flow and manage its debt will be crucial for future performance.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.