Adidas (ADDYY) has been struggling to regain its footing since falling out with rap and fashion icon Kanye West back in 2022. This finally caught up to the German sportswear giant as it took on its first loss since 1992 amidst high-inventory levels weighing down sales. The company reported a net loss of 58 million euros.
It was the first year at the helm for new CEO Bjorn Gulden, and he admitted that the company did not perform to its expectations. Suspending sales of the Yeezy line took a toll, as it was among the most profitable lines for Adidas.
Gulden resumed sales of Yeezy to clear out stock, and this helped the company finish 2023 stronger than it started. This helped bring in 750 million euros, 300 million euros of which was pure profit. Adidas says 140 million of those euros will be donated to organizations battling antisemitism and racism.
But, there is still a lot of work to be done in repairing relationships with retailers, who have tons of inventory that won’t move.
The US segment specifically has been burdened by high inventory, while demand has dropped. Retail storefronts are way overstocked, and this culminated in a 21% drop in sales for the 4th quarter.
Adidas made an effort to clear out inventory through its outlet stores, which brought down inventory levels by 1.5 billion euros.
As the future of Yeezy remains up in the air, the company has turned its focus to promoting lines like Samba and Gazelle – which helped increase footwear sales by 8% in the final quarter of the year.
While 2023 certainly proved to be a tough year, Adidas says it will maintain its dividend of 0.70 euros per share. The company feels that 2024 will be a much better year.
Purely from a stock performance, ADDYY is already off to a great start. It’s up nearly 10% to start the year and has climbed more than 17% in the past month alone. It’s up 4% today on this news.
So, where does that leave investors? We’ve taken a look at ADDYY through the VectorVest stocks software and uncovered 3 things you need to see before doing anything else.
ADDYY May Have Very Poor Upside Potential, But it Also Has Fair Safety and Excellent Timing
VectorVest is a proprietary stock rating system that has outperformed the S&P 500 index by 10x over the past 20 years and counting. It saves you time and stress while empowering you to win more trades.
The system is comprised of 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy.
It gets even easier, though. You’re given a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock at any given time. Here’s what we found for ADDYY:
- Very Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. It offers much better insight than a simple comparison of price to value alone. ADDYY has a very poor RV rating of 0.26. It’s way overvalued, with a current value of just $18.72.
- Fair Safety: The RS rating is a risk indicator calculated from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. ADDYY has a fair RS rating of 0.93, just below the average.
- Excellent Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year. As you can see, the stock has been performing well in the short and long term despite the company’s struggles. The excellent RT rating of 1.42 reflects that.
The overall VST rating of 1.04 is just above the average and considered fair - but ADDYY is still rated a HOLD in the VectorVest system. Learn more about this situation today with a free stock analysis and transform the way you trade for the better!
Want These Types of Insights at Your Fingertips so You Can Win More Trades?
Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.
VectorVest advocates buying safe, undervalued stocks, rising in price. ADDYY may have just posted its first loss since 1992, but the company believes the worst is behind them. As for the stock itself, it has fair safety and excellent timing despite very poor upside potential.
Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!
