Deutsche Bank ranked Adidas among its top European stock picks for the fourth quarter, with the brand expected to continue to benefit from successful innovations, broad strength in the sporting goods category, a refocus on wholesale selling, and exposure from the World Cup.
Analyst Adam Cochrane also slightly raised his price target on Adidas to €210 from €205. Shares of Adidas closed Wednesday at €145.30, down €45 cents, on the Frankfurt Stock Exchange (Xetra).
“Adidas has seen a significant recovery in its sales and profit performance in the last 3 years since the CEO arrived with a greater focus on a range of sports, research and development into new technologies and shoe franchises,” said Cochrane in a note. “This is driving c.10 percent cFX sales CAGR 2025-28E with market share gains across both Performance and Lifestyle categories. With EBIT margin expansion expected in 2026 and 2027 supported by share buybacks, we see mid-teens percent EPS growth in the next 3 years.”
Among the reasons for his ”Buy” rating on Adidas are that the sporting goods industry is expected to grow faster than the global GDP rate, with Adidas having a “clear number 2 position” and aiming to be the leader in all regions outside the U.S.
“The recent success in the London marathon in breaking the two-hour barrier has highlighted the technical achievements being delivered by the company which gives the brand authenticity to compete at the highest level,” wrote Cochrane. “In the running category, Adidas has lost share to a number of specialist running brands over the last few years but we see this gap starting to narrow as the performance from elite athletes trickles down to club runners.”
He further said that while moves by Nike and Adidas to emphasize direct-to-consumer (DTC) have enabled some “challenger brands” to gain share in wholesale channels, Adidas’ refocus on wholesale “will help regain some of this lost market share.”
In the shorter term, the recently-held World Cup in North America is expected to help Adidas drive sales this year above current consensus targets and possibly lead to an EPS guidance raise. Adidas has been an official partner of the World Cup for over 50 years, supplying the official match ball for all FIFA World Cup matches. It also sponsored 14 teams including the finalists, Spain and Argentina.
Stated Cochrane, “Performance franchises should also filter through into the Originals Lifestyle franchises and help offset the decline in sales from the Terrace trend (Samba, Gazelle). The adidas clothing ranges have hit a sweet spot in terms of maximizing the overlap between sports and everyday clothing.”
Risks to his rating included a strong recovery by Nike and excess inventory across the sporting goods marketplace that may increase promotional pressures and weigh on Adidas’ margins.
Adidas was also listed as a top pick for the third quarter. Overall, 16 stocks remained on the list from the third quarter, also including Safran, Volkswagen, Heidelberg Materials, Siemens Energy, SYENSQO, Coca-Cola HBC, Novonesis, British American Tobacco, Entain, Scout24, Lonza, Thyssenkrupp, Merlin Properties, Technoprobe, SAP and Orange. The six stock additions – ING Groep N.V., SPIE SA, Intermediate Capital Group plc, UCB SA, Aéroports de Paris SA and RWE AG – replaced Barclays, Bunzl, Euronext, Novartis, International Airlines Group and E.ON.
Image of F50_Sparkfusion courtesy of Adidas
