Goldman Is Buying Adidas; No Slowdown In Revenue Growth

adidas AG (ADR) ADDYY preannounced its 2Q16 results, with revenue of €4.4 billion, representing a 21 percent increase, ahead of the consensus forecast of a 19 percent increase.

Goldman Sachs’ Jamie Bajwa maintains a Buy rating on the company, with a price target of €139.70.

“The strong increase in currency-adjusted revenue growth in 2Q showed no slowdown vs. 1Q and represents the strongest brand momentum seen by the company in over five years,” Bajwa mentioned.

2Q16 Preannouncement

Adidas preannounced an increase in gross margin and operational leverage, along with one-off benefits, which drove the EBIT for 2Q16 to €414 million.

The analyst believes the underlying margin improvement is a positive, especially given the robust growth margin performance against a backdrop of U.S. dollar headwinds.

Related Link: Adidas Is Finally Figuring Out North American Market

Bajwa views these results as “another indication of the strong brand momentum enjoyed by Adidas and we continue to see strong mid-term value creation potential in the business.”

Guidance Raised

In addition, the company raised its FY16 guidance, forecasting high-teens constant currency revenue growth, with EBIT margin of c.7.5 percent and underlying net income growth of 35–39 percent year-on-year.

“We expect the positive preannouncement to be taken well and note that the revised guidance is 8 percent ahead of FY16 company consensus,” Bajwa stated.

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