On Friday, Deutsche Bank updated its outlook on Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY), increasing the price target to €220 from the previous €200 while maintaining a Buy rating on the stock. The firm's analyst cited a strong product pipeline and management's confidence in achieving a 10% EBIT margin by 2026 as key factors for the positive stance.
The analyst noted that despite no changes to the fiscal year 2024 estimates or mid-term guidance with the fiscal year 2023 results, the management's optimism regarding the upcoming products and strategic initiatives was noteworthy. The first quarter's trading is reportedly performing better than anticipated, with Yeezy sales expected to contribute to the positive trend.
Adjustments were made to the firm's model to reflect Adidas (OTC:ADDYY)'s new divisional structure, which also led to a slight increase in earnings per share (EPS) forecasts. The revised discounted cash flow (DCF) analysis resulted in the new target price of €220 per share, which represents a forecasted price-to-earnings (PE) ratio of 23 times for the fiscal year 2026.
InvestingPro Insights
Adidas AG (OTC: ADDYY) has been in the spotlight following Deutsche Bank's optimistic outlook. To provide a broader perspective, InvestingPro offers some key metrics and insights that could be of interest to investors considering Adidas's stock.
With a robust market capitalization of $40.1 billion, Adidas stands as a significant player in the Textiles, Apparel & Luxury Goods industry. The company's financial health is underpinned by a moderate level of debt, which supports its strategic initiatives and product development endeavors.
InvestingPro Data indicates that Adidas is trading at an adjusted P/E ratio of 1683.64 for the last twelve months as of Q4 2023, which is substantially higher than industry averages, suggesting a high earnings multiple. This could imply that investors have high expectations for the company's future earnings growth. The Price / Book ratio for the same period stands at 7.12, reinforcing the notion of a premium valuation.
One of the notable InvestingPro Tips is the significant return over the last week, with a 1-week price total return of 8.95%. This performance is complemented by a strong return over the last month, with a 19.11% increase, indicating a positive short-term trend in the stock's performance. However, it's important to note that the Relative Strength Index (RSI) suggests the stock is currently in overbought territory, which may lead to volatility or a potential price correction.
For investors seeking additional insights, InvestingPro offers a wealth of tips on Adidas, with a total of 13 additional tips available at https://www.investing.com/pro/ADDYY. These tips provide a deeper dive into the company's valuation, profitability, and market performance. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable insights into Adidas and other investment opportunities.
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