Adidas stock could outperform in the near term, says Baird By Investing.com

Investing.com — Shares of Adidas (ETR:) (OTC:) could be set for a near-term outperform, according to analyst at Baird. Despite maintaining a “neutral” rating on the stock, analysts expressed a more bullish near-term outlook, pointing to several catalysts that could increase toward the end of the year.

These include solid brand momentum, strong performance in key regions and potential upward revisions to 2025 earnings expectations.

Baird pointed to some positive signs for Adidas, particularly the strength of its outdoor footwear segment, distribution expansion and performance in the Chinese market.

These factors, they argue, have been underappreciated by the market and could serve as near-term growth drivers.

Additionally, the company’s next sell-focused call early next week, along with a potential earnings preview in October, could boost confidence and act as a catalyst for the stock to rally.

Adidas has gained momentum in recent quarters, supported by strong sales in Europe and improved performance in North America, where the brand is modeling 5% growth.

Analysts are projecting a solid third quarter, raising their EPS estimate to €2, assuming revenue growth of 16% year-over-year, ex-currency and ex-Yeezy sales.

The company’s operating profit is also expected to reach 520 million euros, representing a margin of 7.9%.

Analysts also point out that search trends for Adidas classics such as the Samba, Gazelle and Spezial remain strong, and the brand’s appeal in both the performance and lifestyle footwear segments is growing.

Additionally, recent improvements in Adidas’ execution in China, where sales rose 9% last quarter, will likely continue to contribute to its relative performance in the region.

In addition, Baird analysts are also raising their 2025 EPS estimates, expecting it to reach €7.50, in line with the consensus.

However, they note that the potential for even stronger performance could push buy-side EPS expectations above €8 per share, which, combined with a price-to-earnings (P/E) ratio in the 30s, could leads to over 10. % growth for the stock by the end of the year.

Despite the favorable short-term outlook, analysts remain cautious about the company’s long-term outlook, especially in light of Nike’s expected comeback and potential challenges in Adidas’ product pipeline over the next 6 to 12 months.

They argue Adidas will need to bolster investor confidence in its ability to scale retro styles and sustain innovation, particularly with the anticipated return of its popular Superstar line.

However, Baird’s analysts point out that Adidas is well-positioned to capitalize on strong global trends in athletics and sports, as well as its own product innovation efforts.

The company’s “Earn the Game” strategy under CEO Bjørn Gulden, which focuses on improving profitability and driving EBIT margin expansion, is seen as a key driver that could unlock long-term growth potential.

“With 28% of revenue coming from North America and its largest market segment (EMEA) accounting for 38% of total revenue, Adidas is positioned as a truly global company,” the analysts said.

While the company faced challenges in China last year, including a 31% drop in sales, it appears to be turning heads in this important market, which should provide a tailwind for future growth.

Baird raised his price target on Adidas to €260 from €255, applying a P/E multiple of 25X to estimated 2026 earnings of €11.40 per share. Analysts note that this valuation is justified by the company’s growth prospects under its current strategy, which targets a double-digit EBIT margin by 2026.

while NIKE (NYSE: ) and Lululemon (NASDAQ: ) could offer slightly better valuations in terms of near-term risk-adjusted returns, Baird believes Adidas’ ability to execute its turnaround plan and deliver consistent results could make this a strong performance soon. term.

Adidas shares traded 1.6% higher on Friday.