Adidas Faces Stock Price Target Adjustments Amid Yeezy Impact
Adidas Stock Price Target Adjusted by TD Cowen
Recently, TD Cowen strategically adjusted its stock price target for Adidas AG (ETR: ADSGN) (ADS:GR), lowering it from EUR267.00 to EUR262.00 while maintaining a Hold rating. This adjustment reflects the firm’s recognition of Adidas' management’s positive trajectory and their confidence in achieving a 10% EBIT margin by the fiscal year 2026. However, some caution was advised regarding the projection for the fiscal year 2025.
Concerns Over Future Growth Potential
TD Cowen raised important questions regarding Adidas' future growth potential, particularly after the exclusion of EUR600 million in Yeezy sales and EUR150 million in Yeezy EBIT in the fiscal year 2024 estimates. The absence of Yeezy poses significant challenges for Adidas in achieving double-digit year-over-year growth, as the Yeezy brand has previously played a critical role in the company’s success.
Comments from Industry Experts
The consensus among industry experts suggests that Adidas may experience a low-teens sales growth excluding Yeezy contributions, with nearly EUR700 million in incremental EBIT. These expectations raise a degree of skepticism over Adidas' ability to maintain such growth, especially amid uncertainties about Yeezy-related revenue.
Impact on Company Performance
Adidas has heavily relied on the Yeezy brand, and with forecasts indicating the exclusion of this revenue stream, the company’s financial performance may take a hit. The adjustment to the price target from TD Cowen signifies a measured approach to valuing Adidas amid these developments.
Evaluation of Current Holding
The Hold rating suggests that TD Cowen does not foresee any immediate catalysts that might significantly alter Adidas’ stock price. Investors are advised to maintain their current positions, with the adjusted target price of EUR262.00 serving as a reference point to gauge the company's market value.
Recent Developments at Adidas
In light of recent developments, Adidas AG's largest shareholder, Groupe Bruxelles Lambert, has decreased its stake to 3.51%. Despite this, the company has experienced positive sales growth in markets like Greater China and North America, excluding the Yeezy product line, indicating a resilient underlying performance.
Analyst Insights from RBC Capital Markets
Analysts at RBC Capital Markets have reassessed their stance on Adidas, raising their price target to €265 from €260 while maintaining an Outperform rating. This upward revision follows Adidas' favorable pre-announcement of its third-quarter results, which revealed strong EBIT contributions exceeding forecasted guidance.
Adidas Capitalizing in Competitive Market
Amid ongoing challenges faced by Nike Inc (NYSE: NKE), Adidas is capitalizing on the demand for popular models such as the Samba and Gazelle. Recent releases featuring new colorways and innovative materials have helped maintain consumer interest and boost sales.
Looking Ahead: Market and Revenue Prospects
RBC Capital anticipates that Adidas will sustain robust revenue growth and enhance gross margin momentum into the third quarter of 2024. There is an expectation that the market may not fully grasp Adidas' potential earnings before interest and taxes (EBIT) due to certain one-time factors affecting past results and effective cost management strategies from the company.
Adidas’ Financial Standing
To complement the analysis from TD Cowen, recent insights into Adidas' financial performance are promising. The company is expected to achieve a growth in net income this year, trading at a low P/E ratio compared to its projected near-term earnings growth. This indicates potential upside for investors navigating the post-Yeezy landscape.
Frequently Asked Questions
What is the new stock price target for Adidas?
The adjusted stock price target for Adidas is now EUR262.00.
Why did TD Cowen lower the price target for Adidas?
TD Cowen lowered the price target due to concerns about future growth without the Yeezy brand's contributions to revenue.
What challenges is Adidas facing after Yeezy’s exclusion?
The main challenge for Adidas is achieving expected growth rates without significant revenue from the Yeezy brand, which has been crucial to its recent success.
How did analysts react to Adidas' recent performance?
Analysts have provided mixed reactions, with some raising price targets due to positive quarterly results, while others express caution about future growth prospects.
What strategies is Adidas employing to boost sales?
Adidas is introducing new models and colorways to attract customers and capture market share left by competitors struggling financially, like Nike.
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