Adidas Stock Forecast June 2021 – Good Time to Buy Adidas Stock?
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Adidas stock hit a 52-week high yesterday and has turned positive for the year. However, the stock is still underperforming the S&P 500 and rival Nike, by a wide margin. What’s the forecast for Adidas stock and is it a good time to buy the stock after the recent underperformance?
The primary listing of Adidas stock is on the German stock exchanges where it trades under the ticker symbol ADS.DE. The stock’s ADR trades on the US OTC markets under the ticker symbol ADDYY.
Adidas stock technical analysis
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Adidas stock forecast
According to the data compiled by CNN Business, Adidas stock has a median target price of $191.71 which is a premium of 3.6% over current prices. The stock’s highest target price is $216.47. Of the 29 analysts covering ADDYY stock, 15 have a buy rating while 12 rates them as a hold. One analyst has a sell rating on the stock.
Earlier this month, Kepler Capital Markets reiterated its buy rating on Adidas stock and analyst Carola Holtz assigned a target price of €317. In May, Morgan Stanley upgraded the stock from underweight to overweight. The brokerage conducted a survey of 1,500 people aged between 15 to 54. The online survey was conducted on consumers who bought either an athletic shoe or apparel in the last 12 months. The survey showed Adidas as the leading athletic brand narrowly ahead of Nike. The company had conducted the survey in 2018 and 2019 as well.
Stifel is bullish on the stock
Earlier this month, Stifel added Adidas stock to its “strong conviction list.” The brokerage said that “Adidas, in our view, is uniquely positioned at the crossroads of a growing focus on health, secular athleisure expansion and home-office adoption.” They added, “We expect compelling evidence of how product recycling and circularity have become core principles.”
The analysts are bullish on ADDYY stock due to its strong exposure to Greater China which has been a fast-growing market for both Adidas and Nike. The brokerage also liked the ESG initiatives of the company is optimistic about the upcoming sale of its Reebok brand.
Sale of Rebook brand
Adidas had acquired Rebook brand 15 years back but has failed to turn around the business. The brand accounts for only about 7% of the consolidated sales now, down sharply from the 18% that it did in 2010. Analysts believe that the sale could fetch only around $1 billion for Adidas which is way below the $3.8 billion that it had paid to acquire the company.
“Reebok and Adidas will be able to significantly better realize their growth potential independently of each other,” said CEO Kasper Rorsted. He added, “We will work diligently in the coming months to ensure a successful future for the Reebok brand and the team behind it.”
Adidas earnings outlook
Adidas expects its sales to rise in “high teens” this year on a currency-neutral basis. Analysts expect the company’s sales to rise 9% in 2021 and 10% in 2022. The company’s sales had fallen 11% last year. Adidas is among the companies that have faced a backlash in China over their comments on Xinjiang in the past.
China troubles
“Learning of allegations against several companies sourcing from Xinjiang, China, where ethnic minorities were reportedly subject to forced labor in spinning mills we explicitly required our fabric suppliers not to source any yarn from the Xinjiang region,” the company had said previously. It added that “Adidas has never manufactured goods in Xinjiang and has no contractual relationship with any Xinjiang supplier.”
Adidas management is optimistic about China
During the first-quarter earnings call, the management alluded to the boycott in China taking a toll on the sales. However, Rorsted is optimistic about the company’s future in China and expects strong growth in the region this year. Its sales had increased 156% year-over-year in Greater China in the first quarter. That said, the revenue rise came from a lower base as the company’s sales in the region had plummeted in the first quarter of 2020 due to the COVID-19 lockdowns.
“So, we are still very confident we will continue to build our position in China, which is the single biggest market for us,” said Rorsted.
Adidas stock valuation
ADDYY stock currently trades at an NTM (next-12 months) PE multiple of 38.4x. The multiple has averaged 48.3x, 34.3x, and 30x over the last one year, three year, and five-year timeframes. That said, given the turnaround efforts and the expected uptick in earnings, the stock looks fairly valued.
Adidas stock looks a good buy at these prices considering its recent underperformance. The stock also pays a dividend and the current yield is around 1%.
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