On Wednesday, Deutsche Bank showed confidence in Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY) shares, as the firm increased its price target to €265 from €255 while reaffirming a Buy rating on the stock.
The German sportswear giant has reported a set of quarterly results that surpassed expectations, with notable strength in core brand sales which grew by 16% in constant currency (cFX) terms.
The second quarter (Q2) earnings before interest and taxes (EBIT) were approximately 10% higher than the consensus forecasts for the fiscal year 2024 (FY24).
This performance has led to Adidas (OTC:ADDYY) raising its own full-year guidance, with the updated EBIT forecast now standing at €1 billion. However, Deutsche Bank's projections are even more optimistic, with an EBIT forecast of €1.275 billion for FY24, almost 30% above the company's guidance.
The robust sales growth is partly attributed to the successful Yeezy product line. The bank also highlighted the "brand heat" as a significant factor in Adidas's performance, suggesting that the brand's momentum is strong. Despite this, Deutsche Bank expressed some caution regarding the company's prospects in China due to challenges faced by other companies in the region.
Adidas's stock has seen a substantial increase this year, with a 25% rise year-to-date (YTD), a notable achievement within the consumer sector. This uptick reflects investor optimism about the brand's strength and its ability to maintain a solid growth trajectory.
In other recent news, Adidas has reported strong Q2 results, leading to several adjustments in the company's share price target and rating. JPMorgan increased Adidas's price target to EUR260 based on a 16% year-over-year increase in Q2 sales, excluding its Yeezy brand.
This robust growth, along with a solid gross margin of around 50.3%, resulted in a significant EBIT outperformance. Following this performance, Adidas upgraded its full-year 2024 forecast.
Additionally, Telsey Advisory Group upgraded Adidas from a Market Perform to an Outperform rating, increasing the price target to EUR 285.00. This decision was prompted by an impressive 16% growth in Q2 revenue, driven by strong consumer demand for Adidas footwear. The success of Adidas Originals franchises, particularly the Samba and Gazelle models, played a significant role in this growth.
Morgan Stanley maintained its Overweight rating on Adidas, keeping a price target of €258.00, following Adidas' significant acceleration in sales growth in Q2. Adidas also raised its full-year 2024 EBIT guidance to approximately €1 billion, reflecting the Q2 outperformance and increased expectations for the second half of the year.
RBC Capital highlighted Adidas' positive earnings revisions and strong brand momentum within the sporting goods sector, despite some skepticism about the potential for further earnings upgrades.
Deutsche Bank raised its price target for Adidas to €255.00, maintaining a Buy rating based on the projected positive impact of the Terrace trend on the company's sales and gross margin. These are the recent developments in Adidas's business strategy and market positioning.
InvestingPro Insights
As Adidas AG (ADS:GR) (OTC: ADDYY) continues to outperform expectations, real-time data from InvestingPro shows a nuanced picture of the company's financial health. With a market capitalization of $46.57 billion and a high P/E ratio of 319.09, reflecting its robust earnings potential, Adidas is trading at a premium. Analysts have revised their earnings upwards for the upcoming period, indicating confidence in the company's ability to grow its net income this year.
InvestingPro Tips highlight that Adidas operates with a moderate level of debt and has been profitable over the last twelve months. Additionally, the company's stock trades with low price volatility, suggesting a stable investment. With a large price uptick of 45.03% over the last six months and trading near its 52-week high, Adidas's stock performance mirrors the positive sentiment surrounding the company's growth prospects.
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