On Monday, Amer Sports Inc. (NYSE:AS) received a new Outperform rating from Evercore ISI, accompanied by a price target set at $21.00. The firm's analysis highlights the significant impact of the Arcteryx brand on the company's financial performance, noting its contribution of approximately 61% to Amer's EBITDA and 75% to the total stock value.
"Arcteryx™s outsized growth will be the key tailwind to the Amer P&L", says Evercore ISI.
The growth of Arcteryx is attributed to strategic changes implemented by the management team, which includes former members of Lululemon (NASDAQ:LULU)'s leadership. The brand has reduced its reliance on undifferentiated wholesale channels, which now represent less than 30% of its revenue, down from 80% in 2020. Additionally, there has been a substantial shift towards direct-to-consumer (DTC) sales, with sales per store doubling in North America and quadrupling in China since 2019.
Evercore ISI forecasts a 19% compound annual growth rate (CAGR) for Arcteryx's revenue from 2023 to 2025, which is higher than Amer's overall projected growth rate of 13%. This projection is based on two main factors: the potential for increased brand awareness in the United States, where it is currently at 4%, and the continued growth in outdoor activity participation in China. The firm estimates that China will add over 1 million new skiers per year, compared to approximately 300,000 in the United States.
The financial significance of Arcteryx to Amer Sports is further underscored by the brand's profit margins, which are around 800 basis points higher than Amer's total margins.
InvestingPro Insights
Amer Sports Inc. (NYSE:AS) has recently been in the spotlight following an Outperform rating from Evercore ISI, with a price target of $21.00. This optimistic outlook is largely driven by the success of the Arcteryx brand, which has become a cornerstone of Amer's financial structure. To provide a more comprehensive picture of the company's current market position, here are some key insights from InvestingPro:
With a market capitalization of $7.85 billion, Amer Sports stands as a significant player in the industry. The company's revenue growth has been impressive, with a 35.27% increase in the last quarter, indicating a strong market demand for its products. This aligns with Evercore ISI's positive forecast for Arcteryx's revenue, supporting the notion of a robust growth trajectory for the brand.
InvestingPro Tips suggest that Amer Sports operates with a considerable debt burden, which is an important factor for investors to consider when evaluating the company's financial health. Additionally, the stock is currently in overbought territory according to the RSI, which could signal a potential pullback or consolidation in the near term.
Despite not being profitable over the last twelve months, the company's liquid assets exceed its short-term obligations, providing some financial flexibility. Amer Sports does not pay a dividend, which may be a consideration for income-focused investors.
Investors interested in a deeper dive into Amer Sports can explore more InvestingPro Tips, with a total of 9 additional tips available, by visiting https://www.investing.com/pro/AS. For those looking to enhance their investment strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
In summary, while Amer Sports faces challenges with profitability and debt, the company's strong revenue growth and the strategic success of Arcteryx provide a positive outlook for future performance.
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