On Tuesday, Morgan Stanley (NYSE:MS) reaffirmed its Overweight rating on Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY), maintaining a price target of €258.00. This decision follows Adidas (OTC:ADDYY)' unexpected positive pre-announcement of its second-quarter 2024 results. The company reported a significant acceleration in sales growth, excluding Yeezy brand sales, which saw a rise to 16% in constant currency, compared to just 5% in the first quarter and surpassing the consensus forecast of 11%. This surge was accompanied by a solid gross-margin performance.
Adidas has also raised its full-year 2024 EBIT (earnings before interest and taxes) guidance to approximately €1 billion, an increase from the previous estimate of around €700 million. This new forecast still falls short of the consensus estimate of €1.057 billion. However, the upgrade reflects both the second-quarter outperformance and increased expectations for the second half of the year. Despite this, the company's management is known for its conservative guidance, suggesting there may be room for further positive revisions in the future.
The sportswear giant's positive pre-announcement contrasts with a series of profit warnings issued by luxury brands earlier in the week. Adidas' strong second-quarter performance is indicative of a robust underlying sales growth momentum. The company's ability to outperform market expectations and maintain a solid gross margin underscores its operational strength.
Morgan Stanley's reiteration of the Overweight rating suggests that the firm continues to view Adidas as a favorable investment, with expectations of ongoing positive developments and the potential for the stock to outperform the market. The company's recent performance and the raised guidance provide a foundation for this positive outlook.
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