Amer Sports Analysts Rally Behind Its Growth Potential, Spotlighting Arc'teryx And China Expansion

Goldman Sachs analyst Brooke Roach initiated coverage on Amer Sports Inc AS with a Buy rating and a price target of $21.

The analyst views Amer Sports as a compelling portfolio of premium, innovation-led brands with healthy growth opportunities. 

The company has significant scope for profitable growth and margin expansion led by market share growth in structurally attractive end markets, particularly the Arc’teryx brand, continued DTC-led growth, including unit expansion, category, and geographical expansion, including continued growth in China following solid investments in the region in recent years, and margin expansion driven by growth in profitable geographies and brands.

BofA Securities analyst initiated coverage on Amer Sports with a Buy rating and a price target of $18. The analyst said Amer Sports is a portfolio of premium, performance-driven brands led by Arc’teryx, Salomon, and Wilson.

The analyst noted a valuation of 15.5x EV/EBITDA is compelling when considering its 13% sales growth and 20% EBITDA growth over the next three years. The analyst is most bullish on the outlook for Arc’teryx and noted that the brand has strong momentum in the technical outdoor luxury category. 

The analyst forecasts Technical Apparel sales to grow at a 19% two-year CAGR through fiscal 2025. Given the faster growth, the analyst expects its high margin profile (19%-22% operating margin) to be accretive to total AS margins.

As per the analyst, growth drivers for Arc’teryx include product innovation (including women’s, year-round, and other categories like footwear), store openings, and geographic expansion. Rounding out the other segments, the analyst forecasts 11% sales growth in Outdoor Performance (9-10% margin) and 7% in Ball and Racquet Sports (4% margin).

The analyst noted that a critical competitive edge is Amer’s expertise in China (18% of total sales). The analyst expects the region to continue to be a core growth driver for Technical Apparel (China represents 43% of sales) and Outdoor Performance (8%). The analyst projects fourth-quarter revenue of $1.31 billion.

Morgan Stanley analyst Alex Straton initiated coverage on Amer Sports with an Equal-Weight rating and a price target of $16. Amer’s sportswear/outdoor concentration, brand dominance/heritage, premium positioning, & global reach are compelling, & make it a unique asset within his Softlines Retail & Brands coverage, as per the analyst.

But the business also faces a challenging industry-wide first half of 2024 Brands wholesale backdrop (reduced visibility), carries outsized leverage levels, is highly reliant on Technical Apparel China & North America DTC strategy execution to deliver its medium-term topline growth & profitability hopes (more below), & likely suffers from the fundamental volatility multi-brand portfolio businesses tend to operate with, Straton said. Straton projects fourth-quarter EPS of $(0.04).

JP Morgan analyst Matthew R. Boss initiated coverage with an Overweight rating and price target of $19. The analyst noted the portfolio notably led by the Arc’teryx brand in “early innings” growth with the business transformation from fiscal 2020-22 setting the foundation for annual +low-to-mid-teens(+) revenues and mid-to-high-teens adjusted EBITDA growth. 

Specifically, he noted market share gains within the expanding $450 billion global athletic apparel, footwear, and equipment TAM driven by a diversified mix of market-share- leading brands across categories, product innovation engine, DTC-led go-to-market strategy, and global size/scale. 

Bottom-up, he modeled a +11% revenue CAGR through fiscal 2025 on a mid-teens EBITDA margin, led by the Arc’teryx brand, which remains in early innings growth across geographies, channels, and categories operating with EBITDA margins ~10 points above the consolidated portfolio. Boss projects fourth-quarter revenue and EPS of $1.31 billion and $0.01.

Price Action: AS shares traded higher by 3.54% at $16.09 on the last check Monday.

Photo via Wikimedia Commons