ADS: Brand Strength Will Support Premium Margins Despite Intensifying Competitive Pressures

The analyst price target for adidas has been modestly reduced to EUR 222 from EUR 229 as analysts temper their fair value and margin assumptions, despite recent supportive coverage including new Outperform and Overweight ratings.

Analyst Commentary

Bullish analysts point to a supportive fundamental backdrop for adidas, with recent coverage highlighting confidence in the company’s ability to sustain profitable growth despite a more competitive landscape in sportswear and footwear.

At the same time, the modest trimming of the consensus price target underscores a more measured stance on execution risk and margin durability, particularly as adidas navigates product cycles and regional demand normalization.

Bullish Takeaways

New Outperform coverage with a EUR 210 price target reinforces the view that adidas remains undervalued relative to its long term growth potential, even after the recent share price recovery.
The higher EUR 238 price target from JPMorgan, paired with an Overweight rating, signals confidence in adidas delivering above consensus earnings through a mix of pricing, product innovation, and cost discipline.
Bullish analysts see continued brand strength and global distribution scale as key drivers supporting a premium valuation multiple versus smaller athletic peers.
Supportive research flow, including multiple positive initiations and target upgrades, is viewed as a potential catalyst for further re rating as execution milestones are met.

Bearish Takeaways

The small reduction in the overall analyst price target suggests growing caution around margin upside, with some assuming more conservative gross margin and operating leverage trajectories.
Competitive pressures in key categories, particularly running and team sports, are seen as a constraint on pricing power and share gains, limiting the scope for significant valuation expansion.
Bearish analysts highlight execution risk around product diversification and regional mix, warning that missteps could delay the path to higher, more sustainable returns.
References to adidas as a strong incumbent in other companies’ research underscore that while the brand is well positioned, it is also exposed to any slowdown in broader athletic demand cycles.

What's in the News

Adidas raised its 2025 guidance, now expecting around 9% currency neutral revenue growth for the adidas brand and operating profit of about €2.0 billion, up from a prior €1.7 billion to €1.8 billion range (company guidance).
The company is moving ahead with a €499.61 million fixed income offering, adding J.P. Morgan SE, Banco Bilbao Vizcaya Argentaria, BNP Paribas, Deutsche Bank, UniCredit Bank, and DZ BANK as co lead underwriters, broadening its banking syndicate (offering documentation).
Adidas launched PG x Adidas Adizero Impact Shades Cleats in partnership with Perfect Game, a limited edition baseball cleat collection that sold out on site at its debut tournament and will anchor future collaborative product activations (product announcement).
Adidas and GLO, a Bunzl plc business unit, announced adidas pro work, a new high performance safety footwear line targeting construction, maintenance, and logistics workers, with first models slated for launch in the second quarter of 2026 (client announcement).

Valuation Changes

Consensus Analyst Price Target: fair value estimate reduced modestly to approximately €222.3 from €229.5, reflecting a slightly more cautious outlook.
Discount Rate: nudged down marginally to about 6.83% from 6.84%, implying a nearly unchanged perceived risk profile.
Revenue Growth: long term growth assumption edged lower to roughly 7.93% from 7.99%, indicating a small tempering of top line expectations.
Net Profit Margin: projected profitability trimmed to around 8.13% from 8.34%, signaling slightly lower margin durability assumptions.
Future P/E: forward valuation multiple eased fractionally to about 19.23x from 19.31x, pointing to a minimally lower premium embedded in the model.

Accelerating demand for performance and athleisure products, global diversification, and expanded D2C channels are driving higher sales growth and improving margins.
Product innovation, successful relaunches, and sustainability initiatives are enhancing brand equity, enabling premium pricing, and strengthening long-term customer loyalty.
Tariff-driven cost pressures, limited pricing power, supply chain risks, stronger competition, and fashion cycle volatility threaten adidas' margins, market share, and earnings outlook.

Catalysts

About adidas

Designs, develops, produces, and markets athletic and sports lifestyle products in Europe, North America, Greater China, Latin America, Japan, and South Korea.What are the underlying business or industry changes driving this perspective?

The accelerating global health and fitness movement is driving strong demand for adidas' performance and athleisure product categories, as demonstrated by double-digit growth in key segments like Running (+25%), Training (+20%), and Basketball, positioning the company for sustained volume expansion and recurring sales growth (impacts revenue and earnings).
Expanding middle-class incomes and urbanization in emerging markets are enabling adidas to achieve robust, diversified growth, as reflected by exceptional sales increases in Latin America (+25%), Asia-Pacific (China +13%, Japan/South Korea +15%), and key leadership gains in Mexico, supporting higher premiums and margin expansion through global revenue diversification (impacts revenue, margin, and scale benefits).
The ongoing shift to direct-to-consumer e-commerce and retail channels (+9% e-commerce, +9% brick & mortar, continued D2C expansion) is improving adidas' control over branding, driving higher-margin sales, and strengthening customer data utilization, which will gradually enhance net and gross margins as the channel mix evolves.
Strong pipeline of innovative products, successful relaunches (Superstar, Stan Smith), and continued cultural collaborations (Oasis, Samuel L. Jackson, athlete partnerships), combined with rising mainstream acceptance of athleisure, are expected to fuel demand and allow for selective ASP (average selling price) increases on new high-profile releases, supporting higher gross margins and earnings power.
Investment in sustainable materials, circularity initiatives, and market-specific product development (China-for-China, localization) are reinforcing long-term brand loyalty and positioning adidas to capitalize on heightened consumer demand for sustainability, which should allow for premium pricing and stronger brand equity, positively impacting long-term gross margin and customer retention.

adidas Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming adidas's revenue will grow by 8.2% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.8% today to 8.2% in 3 years time.
Analysts expect earnings to reach €2.5 billion (and earnings per share of €14.33) by about September 2028, up from €1.2 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €2.0 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.5x on those 2028 earnings, down from 25.9x today. This future PE is greater than the current PE for the GB Luxury industry at 18.7x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.57%, as per the Simply Wall St company report.

adidas Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Rising U.S. import tariffs on footwear and apparel sourced from key Asian countries (Vietnam, Indonesia, etc.) are creating significant, ongoing cost headwinds (€200 million+ for second half of 2025 alone), with uncertainty about full mitigation and increased pressure on adidas' U.S. profitability and net margins over the next several years.
The ability to pass through these cost increases via higher prices is limited by consumer price sensitivity in the U.S. market and increased promotional activity, risking reduced sales volumes, compressed gross margins, and lower earnings, especially if key competitors (like Nike) do not equally raise prices.
adidas remains highly dependent on third-party suppliers and globalized production, which exposes the company to future logistical disruptions, FX volatility, and additional regulatory or geopolitical shocks-potentially increasing operational costs and pressuring both margin and revenue growth.
Competitive intensity is increasing, especially in North America, with larger rivals and nimble new entrants (including DTC and social-media-native brands) threatening adidas' market share and pricing power; underperformance in the crucial U.S. marketplace could hamper global revenue growth and operating leverage.
Fashion cycle risk is elevated, with certain key franchises (e.g., Terrace, Samba) showing signs of plateauing in mature markets; failure to deliver timely and sustainable innovation in both lifestyle and performance segments could lead to higher inventory risk, increased markdowns, and profitability drag.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €241.02 for adidas based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €280.0, and the most bearish reporting a price target of just €182.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €31.1 billion, earnings will come to €2.5 billion, and it would be trading on a PE ratio of 20.5x, assuming you use a discount rate of 6.6%.
Given the current share price of €172.0, the analyst price target of €241.02 is 28.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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