Why Adidas Stock Was Hit On Tuesday

Clearly, investors weren’t ready to gamble on stocks sneakers (ADDY -1.94%) on the second trading day of the week. Shares of the U.S.-traded athletic apparel company lost nearly 2 percent of their value on a day when the market generally did well, with S&P 500 closing index 0.5% higher. Adidas had no negative news to report, but an analyst’s new take on the stock sparked the selloff.

Downgraded from buy to hold

The person behind the movement was Barclays analyst Wendy Liu, who pulled the trigger long before the US market opened. He now thinks Adidas stock deserves only an equal weight recommendation. She was previously an Adidas bull, labeling him overweight (buy).

In making the downgrade, Liu also cut his price target on Adidas from 254 euros ($281) per share to 215 euros ($238).

Her argument involved the Chinese market, which for large companies is an important prize in their international efforts. According to Liu, a recent trip to China indicated continued economic weakness, which means more intense competition for the German-based company.

Tough conditions, tough competition

While the global trend to emphasize wellness, health and fitness greatly benefits a core sector like Adidas, the company will always have plenty of rivals. And when one of its major markets starts to falter, the results can be quite damaging.

The company will have to find a way to compete in what could be a declining Chinese market, which, by the way, is where many of Adidas’ rivals have a strong presence, not the least of which is the sportswear giant in US. NIKE.