Deutsche Bank lifts Adidas price target with Buy rating By Investing.com

On Friday, Deutsche Bank adjusted its price target on shares of Adidas AG (ETR:) (ADS:GR) (OTC: ADDYY), raising it to €255.00 from the previous target of €250.00. The firm reiterated its Buy rating on the stock. The adjustment comes in light of Adidas (OTC:)’s current fashion trend, the Terrace trend, which is expected to continue driving sales, particularly with the addition of football-related apparel.

The Terrace trend is anticipated to have a positive effect on Adidas’s performance across most regions and is projected to contribute to the company’s gross margin. For the second quarter, Deutsche Bank forecasts an underlying sales growth of approximately 9.5% for the Adidas brand, although this is expected to net down to around a 3% increase due to the annualization of Yeezy sales from the previous year and negative foreign exchange translation effects.

Deutsche Bank predicts a significant increase in the gross margin by roughly 250 basis points in the second quarter, with operating expenses up by approximately 6.5%. After accounting for €25 million of Yeezy EBIT, the bank estimates a second-quarter EBIT of €258 million, marking a 47% year-over-year increase.

The firm has also raised its full-year 2024 EBIT forecast for Adidas by 8% to €1,191 million, implying a 5.3% margin. For subsequent years, a more moderate EBIT growth of about 2% is assumed, driven by a slightly higher revenue base. The revised price target of €255 is based on these earnings changes and is derived from a discounted cash flow (DCF) analysis.

In other recent news, Adidas AG has been the recipient of several positive analyst notes, with Morgan Stanley maintaining an Overweight rating and a price target of €258, projecting strong revenue momentum and gross margin expansion for the company.

In addition, Adidas surpassed Q1 expectations with a significant rise in gross margin to 51.2%, an 8% increase in same-store sales, and an operating profit of €336 million. Bernstein analyst Aneesha Sherman estimates that the company’s Samba and Gazelle sneakers will generate approximately €1.5 billion in sales this year, accounting for around 7% of Adidas’s overall revenue.

Furthermore, investment firms Baird, TD Cowen, and Telsey Advisory Group have adjusted their price targets for Adidas, reflecting the company’s strong brand momentum and optimistic outlook. Baird increased its target to €240, TD Cowen raised its target to €216, and Telsey moved its target to €245. Adidas is also diversifying its portfolio with limited-edition collaborations, such as the $350 Y-3 Gazelle with Japanese designer Yohji Yamamoto, and is preparing to market its Superstar shoe more aggressively next year.

InvestingPro Insights

Adidas AG (OTC: ADDYY) is a brand that continues to capture the market’s attention with its innovative fashion trends and strategic moves in the sportswear industry. With Deutsche Bank’s recent price target adjustment, it’s notable that Adidas is not just a trendsetter in fashion but also a topic of interest among analysts. According to InvestingPro data, Adidas has a market capitalization of $42.68 billion, demonstrating its significant presence in the market. Despite a slight decline of 3.88% in revenue over the last twelve months as of Q1 2024, the company has managed to maintain a robust gross profit margin of 49.12%, which is a testament to its pricing power and operational efficiency.

InvestingPro Tips for Adidas highlight several key aspects: analysts have a positive outlook, with four analysts revising their earnings upwards for the upcoming period, and the company is expected to be profitable this year. Additionally, Adidas is recognized as a prominent player in the Textiles, Apparel & Luxury Goods industry. However, it is trading at high valuation multiples, with a P/E ratio of 297.66 and a Price/Book multiple of 8.16 as of Q1 2024, indicating that the market has high expectations for the company’s future performance.

For readers looking to delve deeper into Adidas’s financial health and future prospects, there are additional InvestingPro Tips available. Discover more detailed analytics and insights by visiting https://www.investing.com/pro/ADDYY, and take advantage of the exclusive offer by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these tools at your disposal, you can make more informed investment decisions about Adidas and other companies in the industry.

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