Overview: Adidas AG is a German multinational corporation that designs and manufactures sports shoes, clothing, and accessories. The main brands of the Adidas Group are Adidas, Reebok, Reebok-CCM, and Taylor Made. Adidas is publicly traded on XETRA, the electronic trading system for securities-based in Frankfurt, Germany, under the ticker code ADS.
Catalysts: Adidas is still trading well below its 2013 highs. During 2014 Adidas suffered a decrease in income which resulted in a significant correction of the share price in 1H2014. On a technical level, the stock has regained momentum as we now expect mid-single-digit sales and earnings growth for 2015. In line with our bullish view of German equities, Adidas provides attractive exposure to one of Germany’s largest companies. Its global operations are expected to benefit from a lower EUR as all geographic areas with the expectation of Russia are projected to grow in line with forecasts.
Hurdles: The sports clothing industry is highly competitive as competitors such as Puma, Asics or New Balance push further into Adidas’ market space. Whilst sales revenue increased by 2.3% last year, earnings have declined and there is no guarantee that Adidas will reverse this trend.
Investment View: Adidas AG offers profitable exposure to the global sports clothing industry. We project single-digit revenue growth and earnings improvements for 2015. Whilst a lower EUR should boost exports, we initiate coverage with a ‘buy’ recommendation. Our 12- month target is €92.00.
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