Shares in adidas AG (OTCQX:ADDYY) were given a double-upgrade by Morgan Stanley (NYSE:MS), based on ever-wider positive consumer sentiment about the sort of sports shoes it makes, typified by 'terrace trainers' like the Gazelle, Samba and Spezial.
The German sportswear giant's "lifestyle momentum has legs", the investment bank Morgan Stanley said, lifting its rating to a positive 'overweight' from the previous bearish 'underweight' stance, with a share price target hiked to €235 from €175.
The "fashion pendulum" has been swinging in the past year or so from chunkier basketball shoes to Adidas's terrace sweet spot, including in the US.
"We were previously skeptical on the power of this trend to meaningfully move the needle at Adidas given its small scale and scarcity model (<1% of sales prior), and were concerned on the sustainability of the fashion trend," the analysts wrote.
Ground-level retail industry checks point to "building positive sentiment and top-line momentum", analysts wrote in a note.
"In contrast to our channel checks in January that were still relatively mixed (in particular in the US), our latest round of checks published today point to broad-based positive sentiment building across the Adidas product pipeline."
These pointed to "strong" underlying trends that are broadening for Adidas.
"Several retailers commented on the ongoing heat of Adidas' terrace shoes, importantly also now including the US where there was previously more skepticism following our last round of channel checks in January," said the analysts.
CEO Bjørn Gulden last month presided over the company's first annual loss since 1992, as the loss of sales from the cancelled Yeezy partnership with Kanye West hit revenues.
But after a year and a half in charge, Gulden was praised by Morgan Stanley for skilfully pouncing on the terrace trend, which "importantly" has included clear product segmentation and new colours and variations to keep the hype going.
Fans of basketball shoes will still be pleased about positive momentum for the Anthony Edwards basketball shoe AE1.