This article was written by David Shabotinsky, a Financial Analyst at I Know First, and enrolled at the undergraduate Finance program at the Interdisciplinary Center, Herzliya.

Adidas Stock Forecast

Summary

Adidas Group financial review for the past five quarters

future expectations for business development

I Know First’s self-learning algorithm remains bullish moving into Q4 2016 announcements

Background

Adidas AG (Adidas Group) manufactures sports shoes and sports equipment. The Company produces products that include footwear, sports apparel, and golf clubs and balls. adidas sells its products worldwide. The firm is considered NIKE’s largest rival in the athletic footwear industry. ADS AG is expecting to announce its Q4 2016 results on March 8th, 2016, and many research analysts maintain a bullish view on the firm’s prospective results. I Know First’s self-learning algorithm maintains a bullish mid-term outlook on the firm moving forward.

Adidas has been losing significant market share to its main competitor NIKE Inc. in Western Europe and key market arenas in America since 2014. Adidas has seen tremendous growth continuing into 2015 as it battles to compete with Nike, as well as other competitors like Under Armour. China continues to be seen as a major market for growth. Net sales overall grew by 16.4% from 2014 to 2015 (after declining between 2013 and 2014), and their overall net income as well grew by 17.6%, from 568 million euros to 666 million euros.

During the past three quarters in 2016, Adidas has well performed superb in comparison to its previous quarter counterpart. Net profit margins have continued to grow and reached 7.13% for the second quarter of 2016, compared to a 6.5% margin during 2015. Overall, Sales have increased by 17% for Adidas Group, during the third quarter. This was primarily driven by strategic business development expansion into key market arenas in Western Europe, America and China. Reebok, which has had sales growth for over 13 quarters, continue to grow by 7% in sales during the third quarter.

Financial highlights for the past 5 quarters:

Though NIKE Inc. has recently abandoned its golf segment, Adidas Group had seen its revenues rise by 6%, from its TaylorMade Adidas apparel. This was led by stronger sales metal woods and putters (golf-clubs). Rumors have even spread the Tiger Woods may sign-on with Adidas Group for a long term contract.

“2016 will be a record year for the Adidas Group with truly exceptional results. Going forward, it is our job to make this fantastic company even better. We will ensure that the Adidas Group remains a growth company that delivers sustainable top- and bottom-line improvements in the years to come as outlined in our long-term strategic business plan ‘Creating the New’.”

-Kasper Rorsted, ADIDAS Group CEO

ADS.DE Global Focus

A main driver for sales growth for ADS.DE has been in their massive investment in women’s athletic apparel products. As a result their sales more than doubled in January, while Nike’s had grown respectively in the mid-teens. The Ultra Boost, NMD and AlphaBounce were the main brands that had helped boost Adidas’ sales.

Though Europe’s weak economic recovery may cause some concern for investors, Adidas’ CEO has recently reassured investors that their sales would not significantly adversely affected. He explained that their main markets are in America and China, of which, he believes Adidas is well position for a continual profit margin growth, in the high teens. Additionally, Rorsted explained that trade tariffs from President Trump would unlikely affect the firm, since they sell premium products that encourage a healthy lifestyle.

I Know First Bullish Forecast

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm, allowing the user to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

Conclusion

Adidas Group is announcing their fourth quarter financial results on March 8th, 2017, premarket. Investing in a firm prior to earnings can result in a massive opportunity set (those the risks are high). ADS.DE has show a high growth trend over the past five quarters, indicating the firm is on track for a positive performance. Additionally, I Know First’s AI-based algorithm maintains a bullish prediction on ADS.DE shares as well.

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