Get 40% Off
🚀 Our AI Picked 6 Stocks that Jumped +25% in Q1. Which Picks Will Soar in Q2?Unlock full list

Adidas stock downgraded to sell, price target cut to EUR150

EditorRachael Rajan
Published 02/01/2024, 02:57 PM
Updated 02/01/2024, 02:57 PM
© Reuters.

On Thursday, CFRA Research revised its stance on Adidas (OTC:ADDYY), downgrading the stock from "Hold" to "Sell" and reducing the 12-month price target from EUR165 to EUR150. This move reflects concerns over the sportswear giant's financial outlook amid currency challenges and competitive pressures.

Adidas has reported a EUR1 billion hit to its 2023 revenues due to unfavorable currency movements, a trend that is expected to continue into 2024. The company anticipates mid-single-digit growth in currency-neutral revenues for 2024, with an operating profit target of EUR500 million.

"We see downside ahead for shares due to the continued drag from its Yeezy exit, the negative currency translation, and continued competition in footwear and apparel from new brands like HOKA and ON," said CFRA Research in a note.

The revised price target of EUR150 is based on a forward price-to-earnings (P/E) multiple of 27.3 times CFRA Research's 2025 earnings per share (EPS) estimate. This valuation represents a decrease from Adidas's 10-year average forward P/E multiple of 32.6 times. Looking beyond a challenging 2024, the firm has adjusted its 2024 EPS estimate down by EUR3.50 to EUR2.50 and set a 2025 EPS estimate at EUR5.50.

Adidas has also released unaudited preliminary results for 2023, indicating a 5% decline in revenues to EUR21.4 billion. The operating profit for the same period fell sharply to EUR268 million, down from EUR669 million in 2022. The downgrade and revised price target reflect the analyst's view of the financial headwinds facing Adidas in the near term.

InvestingPro Insights

Following CFRA Research's downgrade of Adidas, real-time metrics from InvestingPro paint a nuanced picture of the sportswear company's financial health. With a market capitalization of $33.47 billion, Adidas is recognized as a prominent player in the Textiles, Apparel & Luxury Goods industry. Despite this, the company's adjusted P/E ratio for the last twelve months as of Q3 2023 stands at a negative -233.73, indicating that the company is not currently profitable.

Analysts have revised their earnings downwards for the upcoming period, aligning with CFRA Research's assessment of financial challenges. The InvestingPro data also shows a slight revenue decline of -2.78% for the last twelve months as of Q3 2023. Moreover, Adidas is trading at a high Price / Book multiple of 5.78, which may raise concerns about the stock's valuation relative to its net assets.

InvestingPro Tips suggest that while Adidas operates with a moderate level of debt, net income is expected to drop this year. However, there is a silver lining as analysts predict the company will be profitable this year, which could signal a turnaround for investors keeping a close watch on Adidas's performance metrics.

For investors seeking a deeper analysis, InvestingPro offers additional insights and tips. Currently, InvestingPro is running a special New Year sale with discounts of up to 50% on subscriptions. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription. With more tips available on the platform, investors can make more informed decisions about their Adidas holdings and other investment opportunities.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Did you fire this editor that reviewed this article GENERATED WITH AI?
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.