On Monday, RBC Capital Markets raised its rating on Adidas AG (ETR:ADSGN) (OTC: ADDYY) from Sector Perform to Outperform, setting a price target of EUR 200.00. The upgrade reflects the firm's positive view on the company's current product cycle, particularly highlighting the Terrace line as a significant factor in a volatile consumer demand environment.
The analyst noted that Adidas (OTC:ADDYY)'s position is more secure after revising its expectations for the fiscal year 2024, suggesting there could be a higher than anticipated earnings before interest and taxes (EBIT) due to conservative forecasts regarding foreign exchange translation and profits from the Yeezy brand. RBC Capital Markets also underscored Adidas's firm commitment to achieving double-digit revenue growth in the second half of 2024 as a supportive element for the stock's performance.
Despite the optimistic outlook, the analyst expressed that Adidas's ambition to reach a 10% EBIT margin by the fiscal year 2026 is challenging and will likely require further action, particularly once revenue growth gains momentum. This aspect of Adidas's financial goals was identified as an area that will need to be addressed in the future.
The upgrade to Outperform is based on these observations, along with the belief that the current market conditions and Adidas's strategic initiatives present an opportunity for the stock to outperform. The set price target of EUR 200.00 reflects the analyst's confidence in the potential for Adidas's stock value to increase.
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