For the past week, Retail analysts Brian McGough and Jeremy McLean warned investors not to buy the recent hype generated by two sports apparel companies.
Today, the other shoe dropped for both “Best Idea” Shorts.
Adidas (ADDYY) stock price is down over 7%, and Amer Sports (AS) cut its pre-IPO price by 24% just to get the deal done.
“Time stamp me on this: If you want a company that does not have a snot’s worth of chance of hitting numbers in 2024, look at Adidas,” McGough said January 25 on The Call @ Hedgeye. “It just will not hit numbers. If it’s going to rally on these little whispers and nod calls, great.”
Right on cue, the Germany-based shoe giant slashed its 2024 EBIT guide by over 60% today, sending the stock price plummeting to its lowest point since November 1.
“It’s up 5% because ‘pre-earnings’ calls are going well,” McGough said January 25. “Can anyone on this call explain what a ‘pre-earnings’ call is? You have sell-side analysts calling the company trying to figure out what’s going on with numbers, and the company’s basically giving a nod, ‘Yeah, we’re going to hit the quarter.’ I’m pretty sure that’s illegal.”
And as it turns out, wrong.
Amer Sports fell equally flat. One capital markets desk said Hedgeye’s short report is causing major problems for the brand’s hopes of an IPO deal.
Amer, which owns brands like Arc’teryx, Salomon and Wilson Sports, originally eyed a stock price between $16-$18.
“We think this is being valued way too high, given the lift in demand this company has had,” McLean said January 24 on The Call. “People are underwriting a growth in margin profile over the coming years that just is not sustainable. Every single banker on Wall Street is part of this deal, so everyone’s trying to get a slice of what’s supposed to be a $1.7 billion IPO deal.”
Today, Amer lowered its expectations, but McGough says it’s still not enough.
“Bankers are revising this AS deal down to $13 from $16-$18,” McGough wrote in a note to Retail Pro subscribers. “Directionally, that's the right move. But our call here is 'hard pass,' even at $13. There's no reason why this can't be a single-digit stock once the dust settles. When it gets there, then let's talk.”
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