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Adidas has found a way to 'fully exploit' its online opportunity — and it could make a killing
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Adidas' focus on quality growth and margins will help drive up its stock, Macquarie analyst Andreas Inderst wrote.
Inderst raised his price target to €223 ($272).
The sneaker company has had strong share performance since 2015.
It has found a way to take advantage of differentiated products, quick market turnaround, and online sales, which should drive further upside, he said.
Adidas is a European company traded on the Frankfurt stock exchange.
As retailers are struggling to compete online, Adidas is "fully exploiting the digital opportunity."
That is likely to sustain its double-digit earnings growth, according to Andreas Inderst, a Macquarie analyst. But that is just one thing the German sneaker company is doing right, he said.
The company's emphasis on quality growth and margins will boost its stock performance, Inderst said. The weak US dollar, a potential share buyback on its strong cash position, and potential 2018 outlook should also prop up its stock.
Additionally, Adidas offers a new and differentiated product portfolio, reacts quickly to market demand, and its clear strategy under CEO Kasper Rorsted will keep it at its highs, he said. The company has also gained in popularity in China and the US, edging out competitor Nike's dominance, which has been criticized for its slow production and failed attempts to get consumers to bite at its trendy offerings.
Adidas' surging market share in the US, which has gone up 6% to 11% in sales, has spooked competitors. The brand's focus on scale and its ability to recognize trends before they happen has driven profits, according to Mark King, Adidas' head of North America.
There's a lot of potential in the sportswear industry because it grows 4% to 6% a year, Inderst said. While sports brands like Adidas, Nike and Under Armour have had their share of ups and downs, Adidas has learned from its mistakes and changed the company for the better.
"Our analysis suggests that the key determinants of success are: the ability to innovate, the speed of reaction to changing trends, distribution discipline (or lack of) and the degree of diversification by product, category and region," Inderst said.
He raised the price target on Adidas to €223 ($272) per share, about 22% higher than the company's current price of €182.
Correction: This story has been updated to reflect the correct name of the analyst at Macquarie Group.
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