On Monday, Deutsche Bank (ETR:DBKGn) initiated coverage on Amer Sports Inc. (NYSE:AS) with a Buy rating and a price target of $20.00. The financial institution sees Amer Sports as a company poised for both revenue growth and margin expansion.
This outlook is based on the company's attractive valuation and a detailed sum-of-the-parts analysis that suggests potential for further share price gains.
Amer Sports is recognized for its strong investment qualities, which include a low to mid-teens compound annual growth rate (CAGR) in revenue and significant potential for improved EBIT margins. This margin improvement is expected to be driven by approximately 200 basis points of gross profit margin (GPM) expansion, influenced by favorable sales and channel mix tailwinds.
The sales mix could contribute roughly 180 basis points to the company's performance from fiscal year 2023 to fiscal year 2025, with brands like Arc'teryx adding approximately 130 basis points and direct-to-consumer (DTC) channels about 40 basis points.
The company is also projected to experience mid- to high-teens growth in EBITDA. Despite the current uncertain market conditions in China, which may weigh on the stock, Deutsche Bank believes that Amer Sports is well-equipped to manage these challenges. The company's consistent performance, strong management connections in the region, and its premium brand positioning are seen as key advantages.
Deutsche Bank's positive stance on Amer Sports is further reinforced by the firm's confidence in the company's near-term and long-term fundamentals, combined with its current market valuation.
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