In a polarised market, UBS has come down on the bullish side for German sportswear brand Adidas AG.
“Early signs on brand inflection are here,” reckons UBS, noting the perceived halo effect of its lifestyle offering.
Though sceptics believe it may take more time for chief executive Bjørn Gulden to end the period of market share losses, UBS analysts “believe the historical cyclicality of the business, heavily reliant on the fashion cycles of its lifestyle business, means the brand is entering a period of improving momentum”.
The benefits of the new strategy are likely to further accelerate top-line growth from 2024 onwards, they added.
UBS sees Adidas’ internal and external issues receding, with weak sales momentum and the Yeezy debacle being put to bed alongside Chinese supply chain issues and foreign exchange headwinds.
“We expect brand momentum to start to inflect, (and) the stock offers in our view one of the best margin stories in the sector,” noted analysts.
Consequently, Adidas’ rating was bumped up to buy with a €216 (1,850p) price target, with EBIT margins likely to return to double-digits by 2027.