On Wednesday, TD Cowen adjusted its price target for Adidas AG (ETR:ADSGN) (XETRA:ADS) (OTC:ADDYY) to €216, up from the previous target of €209, while maintaining a Hold rating on the stock.
The firm's assessment was based on the company's sales guidance, which suggests the potential for double-digit growth in the second half of the year, with management indicating this could begin as early as the second quarter and continue with confidence into the third and fourth quarters.
The analysts at TD Cowen highlighted Adidas (OTC:ADDYY)' management's expectation of achieving a 10% EBIT margin by the fiscal year 2026, compared to TD Cowen’s model projecting a 5% margin for the fiscal year 2024. This margin improvement is anticipated to result in earnings per share (EPS) of over €10. In light of these projections, the analysts believe that Adidas shares are currently trading at a fair value, estimated at 21 times the forecasted earnings for the third fiscal year ahead.
Adidas' recent performance has been bolstered by a shift in consumer fashion preferences towards classic styles, such as the Terrace and Samba lines. This trend has been gaining momentum, which could positively impact the company's sales and market positioning.
The stock's valuation reflects the anticipated growth and margin expansion that Adidas management has confidently laid out. The company's strategic focus on classic product lines and the expected increase in profitability by 2026 are key factors in TD Cowen's analysis.
Investors and market watchers will likely monitor Adidas' performance over the coming quarters to see if the company can meet its ambitious growth and margin targets, which are integral to the stock's valuation and the investment firm's price target rationale.
InvestingPro Insights
Adidas AG (OTC:ADDYY) presents a mixed outlook with certain key metrics and analyst expectations shaping the investment landscape. According to real-time data from InvestingPro, Adidas has a hefty market capitalization of $43.08 billion, reflecting its significant presence in the industry. However, the company's Price to Earnings (P/E) Ratio stands at an elevated 492.81, suggesting a premium valuation relative to earnings. Additionally, the Price to Book (P/B) ratio as of the last twelve months is high at 8.83, which could indicate the stock is priced richly compared to the company's book value.
InvestingPro Tips highlight that Adidas is anticipated to see net income growth this year, with analysts revising their earnings projections upwards for the upcoming period. This aligns with the positive sales guidance noted by TD Cowen. Moreover, the company is trading near its 52-week high, with a price 95.69% of that peak, underscoring strong recent performance with a 37.4% one-year price total return. However, the Relative Strength Index (RSI) suggests the stock may be in overbought territory, which could be a cautionary signal for potential investors.
For those considering an investment in Adidas AG, there are additional InvestingPro Tips available that provide deeper insights into the company's financial health and market position. Currently, there are over 10 additional tips listed on InvestingPro, which can be accessed for further analysis. To enrich your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This exclusive offer can give you an edge in understanding the nuances of Adidas' financial standing and market potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.