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Is it now time to chase Nike (NKE) stock? Shares of the athletic apparel giant have fallen 20% since the company reported earnings in March. The stock has fallen 34% year to date and 17% over the past year, trailing the S&P 500 in both spans. But there’s reason to expect a rebound.

The global apparel and footwear giant can remove all doubt when it reports fourth quarter fiscal 2022 earnings results after the closing bell Monday. Nike’s underperformance doesn’t reflect the operational excellence the company has displayed over the past several quarters. The stock has fallen even though the company produced encouraging results, overcoming not only rising inflation but also supply chain headwinds to surpass Street estimates, while growing its margins.

The Federal Reserve, however, has since raised interest rates multiple times, igniting market fears of a recession. The company has struggled with inventory, sparking fears from some analysts that the company could suffer higher commodities prices in the near term which could impact revenue in regions like Europe and China. The latter, which is the company second-largest market, is expected to suffer from soft demand due to pandemic-related lockdowns. Last quarter, Nike’s China business improved from a revenue decline of 24% to a much narrower 8% decline.

Still, Nike’s brand strength has been one of the company’s strongest assets, serving as a defense during periods of weak economic growth. The company continues to rely on that brand advantage, reinforcing it both through strategic marketing campaigns and sponsoring well-known athletes. With all of these moving parts to consider, investors on Monday will look to see whether the company can continue to assert itself as one of the better-performing names within the retail sector.

For the quarter that ended May, Wall Street expects the Oregon-based apparel company to earn 81 cents per share on revenue of $12.07 billion. This compares to the year-ago quarter when earnings came to 93 cents per share on revenue of $12.34 billion. For the full year, earnings are expected to be $3.71 per share, up from $3.56 a year ago, while full-year revenue of $46.62 billion would rise 4.7% year-over-year.

The expected decline in both revenue and profits for the just-ended quarter reflects the tough year-over-year comparisons the company is working through and has part of the recent decline in the share price. This quarter, the company’s performance in China will weigh heavily on its results. Analysts at both Barclays and Morgan Stanley last week forecasted weak revenue in the region. Investments in its Direct to Customer (DTC) have begun to expand profit margins.

The management noted that digital revenue as a key driver to support a “high teens operating profit over the multiyear period.” One of the main factors of the DTC model is that it gives Nike not only more pricing flexibility, but also allows the company to better control the consumer shopping experience, while offering customers more personalized products. In Q3, the company beat both the top and bottom lines, with revenue of $10.9 billion and EPS of 87 cents, which beat by 21 cents.

Q3 gross margin increased 100 basis points to 46.6%, thanks to margin expansion in the Direct business driven by lower markdowns. The company’s digital revenue grew more 22%, while Nike branded digital revenue increased 19%, thanks to a 33% rise in North America. Currently, the DTC revenue is $4.6 billion, up 15% year-over-year, accounting for about 35% of its Nike’s brand revenue. On Monday for the stock to reverse course, Nike must produce another beat and issue strong full-year guidance.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The directors of a company tend to have a unique inside view into the business, so when directors make major buys, investors are wise to take notice. Presumably the only reason a director of a company would choose to take their hard-earned cash and use it to buy stock in the open market, is that they expect to make money — maybe they find the stock very undervalued, or maybe they see exciting progress within the company, or maybe both. So in this series we look at the largest insider buys by company directors over the trailing six month period, one of which was a total of $2M by Kevin S. McCarthy, Director at Plains All American Pipeline LP (Symbol: PAA).

Purchased Insider Title Shares Price/Share Value 06/23/2022 Kevin S. McCarthy Director 200,000 $9.81 $1,961,220.00

McCarthy’s average cost works out to $9.81/share. Shares of Plains All American Pipeline LP were changing hands at $10.09 at last check, trading up about 1.5% on Monday. The chart below shows the one year performance of PAA shares, versus its 200 day moving average:

Looking at the chart above, PAA’s low point in its 52 week range is $8.64 per share, with $12.10 as the 52 week high point — that compares with a last trade of $10.09.

Free Report: Top 7%+ Dividends (paid monthly)

Click here to find out which other top insider buys by company directors you need to know about »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Investors in Moody’s Corp. (Symbol: MCO) saw new options begin trading today, for the December 2023 expiration. One of the key inputs that goes into the price an option buyer is willing to pay, is the time value, so with 536 days until expiration the newly trading contracts represent a potential opportunity for sellers of puts or calls to achieve a higher premium than would be available for the contracts with a closer expiration. At Stock Options Channel, our YieldBoost formula has looked up and down the MCO options chain for the new December 2023 contracts and identified one put and one call contract of particular interest.

The put contract at the $270.00 strike price has a current bid of $30.90. If an investor was to sell-to-open that put contract, they are committing to purchase the stock at $270.00, but will also collect the premium, putting the cost basis of the shares at $239.10 (before broker commissions). To an investor already interested in purchasing shares of MCO, that could represent an attractive alternative to paying $276.57/share today.

Because the $270.00 strike represents an approximate 2% discount to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the put contract would expire worthless. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 62%. Stock Options Channel will track those odds over time to see how they change, publishing a chart of those numbers on our website under the contract detail page for this contract. Should the contract expire worthless, the premium would represent a 11.44% return on the cash commitment, or 7.79% annualized — at Stock Options Channel we call this the YieldBoost.

Below is a chart showing the trailing twelve month trading history for Moody’s Corp., and highlighting in green where the $270.00 strike is located relative to that history:

Turning to the calls side of the option chain, the call contract at the $290.00 strike price has a current bid of $36.00. If an investor was to purchase shares of MCO stock at the current price level of $276.57/share, and then sell-to-open that call contract as a “covered call,” they are committing to sell the stock at $290.00. Considering the call seller will also collect the premium, that would drive a total return (excluding dividends, if any) of 17.87% if the stock gets called away at the December 2023 expiration (before broker commissions). Of course, a lot of upside could potentially be left on the table if MCO shares really soar, which is why looking at the trailing twelve month trading history for Moody’s Corp., as well as studying the business fundamentals becomes important. Below is a chart showing MCO’s trailing twelve month trading history, with the $290.00 strike highlighted in red:

Considering the fact that the $290.00 strike represents an approximate 5% premium to the current trading price of the stock (in other words it is out-of-the-money by that percentage), there is also the possibility that the covered call contract would expire worthless, in which case the investor would keep both their shares of stock and the premium collected. The current analytical data (including greeks and implied greeks) suggest the current odds of that happening are 45%. On our website under the contract detail page for this contract, Stock Options Channel will track those odds over time to see how they change and publish a chart of those numbers (the trading history of the option contract will also be charted). Should the covered call contract expire worthless, the premium would represent a 13.02% boost of extra return to the investor, or 8.86% annualized, which we refer to as the YieldBoost.

The implied volatility in the put contract example is 39%, while the implied volatility in the call contract example is 34%.

Meanwhile, we calculate the actual trailing twelve month volatility (considering the last 251 trading day closing values as well as today’s price of $276.57) to be 27%. For more put and call options contract ideas worth looking at, visit StockOptionsChannel.com.

Top YieldBoost Calls of the S&P 500 »

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.