Bernstein analysts upgraded their rating on Adidas from “Market Perform” to “Outperform” due, in part, to Lionel Messi’s move to join Inter Miami to become Major League Soccer’s biggest star. In 2017, Messi signed a lifetime contract with Adidas worth a reported $1 billion.

Seen as the top soccer player of his generation, Messi, 35, is expected to join MLS after having received every honor at the club and international levels, including league titles in Spain and France, four Champions League trophies with Barcelona, the Copa América and, last December, the World Cup with Argentina.

On June 7, the deal for Messi to join Inter Miami was announced but, to date,, has not been finalized. The announcement came days after Messi said he would not return to Paris St.-Germain. Inter Miami is co-owned by soccer legend David Beckham, a long-time Adidas ambassador.

Bernstein’s lead analyst in the space, Aneesha Sherman, wrote that Messi’s move to MLS should help drive U.S. brand heat for Adidas. She noted that joining Beckham’s team “puts two Adidas-sponsored soccer giants in the spotlight in the U.S.” and comes as U.S. soccer participation sees momentum with “more high schoolers than ever choosing to play the sport.”

From a spectator standpoint, Sherman cited survey data that showed that 8 percent of Americans call soccer their favorite sport to watch, up from less than 2 percent in the 2000s and closing in on basketball (12 percent) and baseball (11 percent).

“Adidas already sponsors the MLS, and the Messi news on the back of his World Cup win should drive further heat in the U.S., particularly given the widespread media reports of a revenue sharing arrangement between Messi and Adidas on his Inter Miami merchandising sales,” wrote Sherman in the note.

Sherman also noted that Bjorn Gulden, Adidas’ CEO since the start of 2023, had expressed confidence in Adidas’ prospects in the soccer category this year. All three of Adidas’ key soccer franchises, the X, Predator and Copa, “should all ramp faster due to this deal.”

Finally, Sherman pointed out the surge in Inter Miami’s Instagram followers following the announcement of the deal as an indicator of the potential for U.S. soccer and Adidas. As of June 14, the club had 8.1 million Instagram followers, up from around one million before the Messi deal was announced, and more than every NFL, MLB, NHL, and MLS team account.

Should the deal be finalized, Messi would be the biggest coup for MLS. since Beckham joined the Los Angeles Galaxy in 2007. His presence should also bring more attention to the league and the sport in the run-up to the 2026 World Cup, which the U.S., Mexico and Canada will host.

Bernstein’s upgrade came from several other indicators showing that Adidas’ “brand heat” is building after a challenging 2022.

“Through the course of 2022, the Adidas brand languished amidst too many execution mistakes and short-term uncertainties,” Sherman wrote. “The Yeezy debacle, smaller brands taking share in Europe, retailers across the globe bemoaning the inventory glut and lack of newness, Chinese influencers still refusing to work with the brand, and widespread discounting in all channels were all contributing to deteriorating brand heat. Though we liked the L.T. story, we downgraded the stock to neutral nearly a year ago in light of this trend.”

As Gulden, who formerly led Puma, took over in January, Sherman agreed with his view that the execution and merchandising mistakes, more so than product, were responsible for Adidas’ weakening brand appeal.

“Gulden’s track record of turning around brand heat at Puma, and his focus on brand heat as a core part of what he wants to revitalize at Adidas, made us optimistic, but we wanted to see signs that this was working, and over the past couple of months we have been monitoring for signs that the management of the brand is improving,” wrote Sherman. “Improving brand strength is going to be critical for the company (and the stock) to work, to drive rapid share gains, reclaim prime real estate on retailer shelves, increase full-price selling, and create a path to L.T. growth and margin accretion.”

Among the signs of improving “brand heat” are that Chinese influencers are again working with the brand after several dropped the brand over the last few years as Western apparel brands overall faced boycotts in China over past comments over labor conditions in Xinjiang’s Western region. KOLs (Key Opinion Leaders) are again supporting the brand in China with hauls and product reviews, and Adidas has returned to sponsoring Chinese sports events, collaborating with government agencies.

On product, the Samba and T-toe style continues to drive strong interest. Sherman noted that in conversations with U.S. retailers, including Foot Locker’s leadership team at Bernstein’s recent conference, “we heard a lot of retailer interest in the T-toe style that is different from the more chunky silhouettes that U.S. sports footwear brands are putting out right now. If the T-toe style continues to ramp and drive demand in the U.S., then Adidas will be in a very strong position with no major competitor producing a similar silhouette.”

Sherman also noted that Adidas’ recent Yeezy shoe launch “sold out without backlash to the brand,” and channel checks across the U.S., Europe and China show retailers are still heavily inventoried but expected to clear most stock by year-end, “setting up 2024 well for growth” for Adidas.

In the U.S., Adidas is expected to benefit from Nike’s move to narrow wholesale distribution. Sherman wrote, “In our conversations with retailers, we are seeing unprecedented eagerness to ramp up Adidas order books in 2024, partially because they are seeing a strong pipeline including the T-toe silhouettes and Fear of God collab, but also partially to fill the void of Nike pulling back volume from retail accounts. This can help Adidas get a foot in the door into thousands of retail outlets around the country and gain a chunk of U.S. market share.”

In Europe, Adidas is expected to benefit from Gulden’s close relationships with stores and the “wholesale-centric direction” he’s taking Adidas brand after prior management’s more DTC-focused approach. She wrote, “While we like DTC as a business model long term for Adidas, we agree that Wholesale is the best way to ramp up top line quickly, which is what Adidas is trying to do in the next 2-to-3 years to reclaim market share.”

Sherman also believes that for retailers, Adidas is embracing a “more retailer-friendly tone than they’re hearing from other brands like Nike and Deckers.”

Bernstein raised its price target on Adidas to $112.32 from $91.63 previously. Adidas’ shares closed at $94.57, up $1.06 Wednesday. The stock’s 52-week price range is between $45.48 and $95.13.