It’s a marathon – not a sprint, as Nike CEO Elliott Hill has said. Now, obviously, he was talking about his turnaround plans at the American sportswear company, but he could just as easily have been referring to its German rivals Adidas or Puma. For that matter, he could also have been talking about how investors might view the three firms – as a long-haul trek toward gains, not a quick jaunt.
Let’s take a look at the three brands’ shares.
How do Nike, Adidas, and Puma look now?
Hate to say it, but Adidas shot from hero to zero when news of bumper results for 2024 suddenly turned into a downgrade for 2025. Booming demand last year for its retro Samba and Gazelle sneakers pushed sales 12% higher. But this year, that growth is expected to slow to 10%.
And, honestly, 10% is not too shabby: that kind of growth is something other companies only dream of. So things could be a lot worse.
Adidas is in an interesting spot: the brand aims to be the biggest sportswear business in each of its markets except the United States, where it’s solidly outpaced by Nike. And a potential trade war with the US could actually help its sales – by restricting competition from Nike across most of the world.
Meanwhile, though, Adidas now expects operating profits (that’s its earnings before interest and taxes) this year to be between €1.7 billion and €1.8 billion ($1.9 billion and $2 billion), short of the €2.1 billion that analysts expect. But its management may be erring on the side of caution here, so I suspect the risk is to the upside rather than the downside.
Adidas’s stock price, over time. Source: Koyfin.
Now, Nike’s unlikely to make a full recovery under Hill until next year: this year’s results could well include some one-off losses as he throws everything but the kitchen sink at the company’s problems. That said, Hill’s been careful to manage folks’ expectations – which means the results could be a little sunnier than forecast.
Hill’s got a great reputation: the successful former head of Nike’s consumer and marketplace operations stepped down five years ago but came back in September to take the company’s top job. Theodora wrote a great Research Drop about the company and it’s very much worth a read.
Later this month, the company will release quarterly figures that cover December through February. The previous period saw net income fall 27% to less than $1.2 billion on revenue that was 7.8% lower, at $12.4 billion.
Nike’s stock price, over time. Source: Koyfin.
The outlook is equally gloomy at German rival Puma, where the company has also lowered its guidance for this year after sales blasted 9.8% higher to €2.3 billion ($2.5 billion) in the fourth quarter. In this case, though, there was a decisive spurt in sales growth compared with earlier last year.
The problem was that analysts had been encouraged to expect even better last November. But with full-year net income falling 7% to €282 million as margins crumbled, some have now tempered their expectations for 2025.
Puma has joined its two bigger rivals in embarking on a turnaround program, in its case aimed at controlling costs and improving efficiency. Unfortunately, there have been few signs so far that the brand might actually turn increased sales into higher profits.
Puma’s stock price, over time. Source: Koyfin.
What’s the opportunity then?
All three companies have recently seen a sharp fall in their share prices to reflect the uncertain future.
Nike’s stock sold for $126 just over two years ago, and it’s down at heel now – hanging out where it was five years ago at around $75, with a still challenging price-to-earnings (P/E) ratio of 24x and an earnings yield (that’s the percentage of earnings returned for every dollar invested) of just 2%.
Adidas, meanwhile, has performed well since October 2022, when it dipped to €100 a share. It’s been changing hands recently around €220. The P/E looks unrealistically high at 56x, while the earnings yield is a measly 0.3%. That said, there has been some decent buying interest around €214, and that could continue given the company’s better prospects.
Puma peaked at €115 in November 2021 and now has slipped below €30, where the P/E still looks a bit toppy at 17. Its earnings yield doesn’t really offer sufficient compensation at 2.8%.
Of the three, I’d say Puma looks to be riskiest, worthy of a “hold” maybe, but not quite a “buy”. I’d want some proof that it can improve its profitability before putting money on it.
Adidas may have the best prospects these days, but its rating already reflects that. That said, you could consider picking up the stock if it drops toward €200.
At current prices, Nike looks to be the best buy of the three. You can get up to speed on the stock with Theodora’s Research Drop, here.
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