ADS.DE
adidas AG
Consumer Cyclical · Apparel - Footwear & Accessories
Undervalued·Quality 65·RSI 40·DCF -8%·Conviction 55
Investment Thesis — adidas AG
The market is currently pricing Adidas as a struggling legacy brand, failing to distinguish between temporary operational headwinds and its enduring global brand equity. This mispricing overlooks the significant earnings leverage from inventory normalization and the strategic reset under new management, which is poised to unlock substantial value.
Catalysts
- Successful execution of new product cycles and collaborations (e.g., Fear of God, new running tech).
- Faster-than-anticipated normalization of inventory levels and gross margin expansion.
- Stronger-than-expected rebound in the Greater China market.
Risk Factors
- Failure of new product lines to resonate with consumers, leading to continued market share erosion.
- Persistent inventory overhang requiring further discounting and impacting gross margins.
- Macroeconomic downturns or geopolitical tensions dampening consumer discretionary spending.
Key Debates
Gross margin expands to 53% by Q4 on Yeezy clear-out
Revenue growth exceeds 6.5% by FY24 end
P/E re-rates to 20x by Q3 on 7% net margin