Adidas Stock May Outperform in the Near Term, According to Baird

Adidas stock may be set for strong near-term performance, according to analysts at Baird. While they maintain a “neutral” rating on the stock, they have adopted a more positive short-term outlook, citing various catalysts that could lead to an uptick in stock value by the end of the year.

Key factors contributing to this optimism include robust brand momentum, strong performance in critical regions, and the possibility of earnings expectations being revised upwards for 2025.

Baird highlighted several positive indicators for Adidas, especially the success of its terrace footwear segment, expansion in distribution, and strong performance in the Chinese market. These aspects, they assert, have been undervalued by the market and could act as growth drivers in the near future.

Moreover, the company’s scheduled sell-side focused call next week and a potential earnings pre-release in October could help build investor confidence and facilitate stock movement upward.

In recent quarters, Adidas has shown significant momentum, particularly in Europe and North America, where the brand anticipates 5% growth. The analysts predict a solid third quarter, raising their earnings per share estimate to €2, based on an expected 16% year-over-year revenue growth, excluding currency fluctuations and Yeezy sales. They also anticipate the company’s operating profit to reach €520 million, reflecting a 7.9% margin.

The analysts pointed out that search trends for Adidas’s classic models, such as Samba, Gazelle, and Spezial, remain robust, with increasing appeal across both performance footwear and lifestyle segments. Additionally, improvements in execution in China, where sales rose by 9% last quarter, are expected to continue contributing to the brand’s success in that market.

Baird also adjusted its EPS estimates for 2025, projecting it to reach €7.50, which aligns with consensus expectations. They noted the possibility of even stronger performance could lead to buy-side EPS expectations exceeding €8 per share, which could generate over 10% upside for the stock by year-end, given a low 30s price-to-earnings (P/E) ratio.

Despite this optimistic short-term outlook, the analysts expressed caution about long-term prospects, especially with Nike’s anticipated resurgence and potential challenges in Adidas’s product pipeline over the next 6 to 12 months. They believe that Adidas must reinforce investor confidence in its ability to continue innovating and expanding retro styles, particularly with the expected return of its renowned Superstar line.

Nonetheless, Baird’s analysts highlighted that Adidas is well-positioned to benefit from strong global trends in athletic and athleisure wear, as well as its ongoing product innovation. The company’s “Earn the Game” strategy under CEO Bjørn Gulden, aimed at enhancing profitability and driving EBIT margin growth, is seen as a critical element that could unlock long-term growth potential.

With 28% of its revenues generated in North America and the largest market segment (EMEA) accounting for 38% of total revenues, Adidas is identified as a truly global enterprise. Despite facing difficulties in China last year, which included a 31% drop in sales, the company appears to be on the rebound in this crucial market, providing a promising outlook for future growth.

Baird raised its price target for Adidas to €260, up from €255, applying a 25X P/E multiple to its 2026 earnings estimate of €11.40 per share. The analysts believe this valuation is warranted given the company’s growth prospects under its current strategic direction, which aims for a double-digit EBIT margin by 2026.

While Nike and Lululemon may present slightly better valuations in terms of near-term risk-adjusted returns, Baird believes that Adidas’s execution of its turnaround strategy and its ability to deliver consistent results could position it as a strong performer in the near future.

Adidas shares were trading 1.6% higher on Friday.