On Monday, Citi initiated coverage on Amer Sports Inc. (NYSE: AS) with a Buy rating and a price target of $19.00, highlighting the company's potential for strong growth and margin expansion. Amer Sports, recognized for its diversified multi-branded portfolio that includes over three billion-dollar brands—Arc’teryx, Salomon, and Wilson—stands out to Citi for its prospective top-line growth, particularly in the Arc’teryx business.
The company's leadership position in its categories with Salomon and Wilson is expected to foster growth in North America and international markets over the long term. Citi anticipates that the higher-margin business of Arc’teryx will grow faster than Amer Sports' other brands, contributing to a favorable shift in the company's brand mix. This shift is projected to drive long-term margin expansion and support robust double-digit earnings per share (EPS) growth for the next five years.
Citi's analysis suggests that Amer Sports' current trading levels present a favorable risk/reward scenario for investors. With the stock trading at a forward 2024 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 13.6 times, the firm believes the valuation is attractive.
The analyst's statement underscores the potential upside to Amer Sports' long-term targets, which are predicated on low-to-mid-teens top-line growth. This growth is expected to be fueled by the success of the Arc’teryx business and the opportunities for Salomon and Wilson to expand their market presence.
Investors and market watchers will be keeping an eye on Amer Sports as it endeavors to meet these growth targets and capitalize on the strengths of its brand portfolio, as outlined by Citi's optimistic assessment and price target setting.
InvestingPro Insights
As Amer Sports Inc. (NYSE: AS) garners attention from Citi's optimistic coverage, InvestingPro provides additional insights that could be crucial for investors evaluating the company's potential. With a market capitalization of $7.85 billion, Amer Sports stands out as a significant player in the sports equipment and apparel industry.
One of the key InvestingPro Tips highlights that Amer Sports operates with a significant debt burden, which is an important consideration for investors looking at the company's financial health. Additionally, the Relative Strength Index (RSI) suggests that the stock is currently in overbought territory, indicating that it might be due for a pullback or consolidation in the near term.
From the data perspective, Amer Sports' revenue growth is impressive, with a 35.27% increase in the last twelve months as of Q3 2023. This aligns with Citi's expectations for strong top-line growth. However, the company's price to book ratio stands at a high 2241.86, which could raise concerns about valuation among investors. Despite not being profitable over the last twelve months, the company has seen a strong return over the last month, with a 15.97% increase in its stock price.
For those seeking more comprehensive analytics and insights, InvestingPro offers additional InvestingPro Tips for Amer Sports, which can be accessed through their platform. By using the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable information to guide investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.