On Friday, RBC Capital raised the price target for Adidas AG (ETR:ADSGN) (XETRA:ADS) (OTC:ADDYY) to €260 from €250, while maintaining an Outperform rating on the stock.
The firm anticipates that the sportswear giant will continue its robust revenue growth and gross margin momentum into the third quarter of 2024. They also suggest that Adidas (OTC:ADDYY) might announce a pre-release and raise its full-year 2024 guidance.
The optimism from RBC Capital stems from expectations that the market may not be fully recognizing Adidas' potential earnings before interest and taxes (EBIT) for the fourth quarter of 2024. This outlook takes into account certain one-time factors that affected previous results and the company's effective overhead cost management.
As a result of these factors, RBC Capital has increased its EBIT estimates for Adidas by 12% for the full year 2024 and by 9% for the full year 2025. These revised estimates are now above the consensus among other market analysts.
The new price target of €260 is derived from a discounted cash flow (DCF) analysis, indicating a more bullish stance on the company's valuation. RBC Capital's analysis points to a favorable setup for Adidas as it moves through the latter half of 2024, with financial projections that outpace general market expectations.
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