Wall Street analysts come out very bullish on this recent sporting goods IPO

Published Mon, Feb 26 20248:18 AM ESTUpdated Mon, Feb 26 20249:30 AM EST

Analysts are largely optimistic about one of the newest public companies to hit the market. Amer Sports , the parent of well-known athletic brands such as Wilson and Arc'teryx, began trading on the New York Stock Exchange earlier this month through an initial public offering. The Finnish company raised $1.37 billion at $13 per share, below a previously anticipated range of $16 to $18 for each share. Despite that rocky start, Wall Street has high hopes for the stock. The average analyst polled by FactSet has a buy rating and price target of $19.12, which implies shares can rally 23% over the next year. "We view AS as a compelling portfolio of premium, innovation-led brands with healthy growth opportunity," wrote Goldman Sachs analyst Brooke Roach in a Sunday note to clients. "The company has significant scope for profitable growth and margin expansion." Shares are up more than 5% in Monday premarket trading following the bevy of new analyst calls. Roach is even more bullish than many on Wall Street with a price target of $21 per share. Like many peers on the Street, she sees the company getting a boost from market share growth and an expansion of direct-to-consumer. She's also one of many noting shares will be helped as Amer breaks into and expands within new categories and geographies. Specifically, analysts are following China as a market that can turbocharge growth. "AS's China-focused commercialization strategy led by DTC, supported by regional talent, and focused on key marketing messages drives a compelling growth playbook for further expansion," Roach said. "Arc'teryx has momentum in the region, and this playbook is being replicated by other brands." Multiple analysts deemed Arc'teryx the "crown jewel" of Amer's portfolio. Bank of America analyst Lorraine Hutchinson said there's strong momentum in the technical and outdoor luxury category more broadly, with an expectation for a 19% compound annual growth rate in 2024 and 2025. AS 5D mountain Amer Sports shares over the past 5 days. And Arc'teryx is still in the "early innings" of growth, said JPMorgan analyst Matthew Boss. More broadly, he said the company can continue gaining market share within the global athletic apparel, footwear and equipment industry, which has total addressable market that he valued at around $450 billion. Though Arc'teryx provides a key reason for bullishness, analysts also have their eyes on other well-known brands in the portfolio. Citi analyst Paul Lejuez called Amer an "impressive triple play." He said clothing maker Salomon and tennis racket brand Wilson are both category leaders with growth opportunities, especially in China and other international markets. By Lejuez's calculations, the brands together account for 60% of sales and 40% of profitability, but just 15% of current enterprise value. Baird analyst Jonathan Komp said Amer's transformation story looks underappreciated by investors. The company is also still in the early stages of seeing benefits from its shift to a brand-led model, which means there's decentralized resources and decisions around elements like marketing or distribution between differing segments. "Led by a seasoned leadership team, Arc'teryx provides a halo to Amer's overall valuation," said Baird analyst Jonathan Komp. "While Arc'teryx attracts significant attention, Salomon's geographic and category expansion combined with Amer's consolidated margin expansion opportunity also represent attractive earnings growth levers." Similarly, UBS analyst Jay Sole also came out with a buy rating, noting Amer's narrative arc has just begun. He said the market appears skeptical because of the company's "lackluster" fourth-quarter results that showed cooling quarter-over-quarter sales growth. But Sole argued that likely isn't reflective of top-line growth potential in the longer term. And he said earnings will probably surprise to the upside going forward, leading to an expansion of the price-to-earnings multiple. To be sure, not everyone on Wall Street has a rosy view of the stock. Morgan Stanley analyst Alex Straton initiated coverage with an equal weight rating and $16 price target, pointing to the fact current valuation appears appropriate. "Amer's global, premium, & sportswear-focused portfolio is attractive in our coverage," Straton said. "But, the business faces an uncertain 1H24 wholesale backdrop, & comes with single-segment growth & profitability expansion reliance, multi-brand portfolio volatility risk, & high relative leverage levels."