Analyst Note| David Swartz |
Narrow-moat Adidas fell short of our sales and margin expectations in 2021’s third quarter as COVID-19 lockdowns in parts of Asia, logistical delays, and slow sales in China overshadowed healthy underlying demand in North America and Europe, the Middle East, and Africa. The current outlook suggests Adidas may miss our full-year estimates of 19% sales growth and EUR 7.79 in EPS on continuing operations by a modest amount, but we still believe the activewear markets in the U.S., China, and elsewhere will continue to grow. Thus, we do not expect to make any material changes to our fair value estimates of EUR 209/$123. We view Adidas’ shares, down about 4% on the report, as overvalued.