RBC Capital Markets has upgraded adidas AG (OTCQX:ADDYY) to Outperform, lifting its price target to €210 from €170, whilst claiming the three-striped sportswear group now offers one of the strongest earnings growth profiles in the Canadian bank's coverage, yet its valuation still looks discounted.
The newly pitched price target implies around 28% upside, and RBC points out that Adidas trades on roughly 13 times FY27 earnings, a level that the broker reckons doesn't fully reflect improving execution and revenue visibility.
“Today, adidas is delivering DTC-led revenue growth with healthy forward order visibility and consistent execution,” RBC said in a note.
Momentum is broad-based across regions, product categories and sports verticals, the Canadian bank's analysts highlight whilst anticipating World Cup-related demand and a recovery in market share under chief executive Bjorn Gulden.
RBC expects a strong second-quarter update on 30 July, forecasting €6.65 billion of revenue, up 13% organically, and EBIT of €629 million, equivalent to a 9.5% margin. That would take first-half EBIT to about €1.34 billion, leaving adidas with less than €1 billion to reach its current full-year EBIT guidance of €2.3 billion. “FY26E EBIT guidance is conservative at €2.3bn, which we believe will be comfortably beaten,” the broker added.
RBC forecasts FY26 EBIT of €2.45 billion, rising to €3.0 billion in FY27, supported by high single-digit revenue growth and gross margin expansion. It expects FY27 gross margin to improve by 90 basis points to 52.3%, helped by foreign exchange tailwinds.
