On Wednesday, Telsey Advisory Group adjusted its price target for Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY) shares, increasing it to €245.00 from the previous €225.00 and maintaining a Market Perform rating. The firm noted that Adidas (OTC:ADDYY) is experiencing a brand revival with sequential improvements in all business areas.
The first quarter of 2024 saw a positive impact from the Yeezy release, but the firm highlighted that the core brand's strength is a more significant factor in the company's progress. This improvement is attributed to a growing demand for Adidas Original products, which are gaining global traction and offer higher margins.
Adidas has also seen advancements in its performance segment, particularly with high-end products such as the adios Evo Pro for running, Predator boots for football, and AE 1/Harden 8 shoes for basketball.
Though the brand's momentum has primarily been driven by its footwear, which saw a 13% increase in the first quarter, apparel has also shown signs of recovery with a 2% positive comparison, marking its first rise after eight consecutive quarters of decline.
From a regional standpoint, Adidas's growth is most pronounced in its European home market, where sales increased by 14%, benefiting from a larger presence and market share. In contrast, the North American market experienced a 4% decline.
However, the outlook for North America is optimistic, with expectations of a positive turnaround in the second half of 2024 as inventory levels stabilize and wholesale partnerships improve.
Adidas appears to be on a stable path as 2024 begins, with significant strides towards achieving its goals. The company aims to return to annual sales growth of approximately 10% and reach an operating margin of 10% by 2026.
InvestingPro Insights
Adding to the analysis by Telsey Advisory Group, current data from InvestingPro provides a deeper financial perspective on Adidas AG (OTC: ADDYY). With a market capitalization of $43.08 billion, Adidas's financial health is underpinned by a robust gross profit margin of 49.12% for the last twelve months as of Q1 2024. Despite a slight revenue decline of 3.88% in the same period, the company's revenue growth turned positive in Q1 2024, with a 3.49% increase. This aligns with the observed brand revival and product demand.
InvestingPro Tips highlight that Adidas is expected to see net income growth this year, and two analysts have revised their earnings upwards for the upcoming period, reinforcing the positive outlook presented. Furthermore, with a Price / Book multiple of 8.83 and an EBITDA growth of 13.14%, the company's valuation reflects its strong market position. However, the high P/E ratio of 492.81 suggests a premium market valuation, which is further emphasized by the stock trading near its 52-week high. For investors looking to make informed decisions, there are an additional 12 InvestingPro Tips available, which can be accessed for Adidas AG at https://www.investing.com/pro/ADDYY. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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