2023/02/12 (168.031) Technical Analysis

ADIDAS Shares With A Big GAP In The Price Action
– We Use This Extraordinary Trading Capability For A New 4XSetUp

Dax ends turbulent trading week in the red – Adidas share loses 11.5 percent
After the new high for the year the day before, the Dax fell back significantly on Friday. Oil prices, on the other hand, are increasing.

Affected by a price collapse at Adidas, the sentiment on our German stock market clouded over at the end of the week.
Allow me to stay straight, and break it down – it was a desaster. A desaster full of shame and/or guilt: But at least it`s over meanwhile; in February 2023!
At the end of trading, the Dax was at 15,308 points, on friday, two days before, with a intraday loss of 1.4 percent. The Adidas shares fell by 11.5 percent and posted their most red trading day since the beginning of the corona pandemic in March 2020. The consequent but abrupt separation from the American scandal rapper Kanye West is expected to put the sporting goods group in the red in the current year. “A terrible prospect – far below all expectations,” commented the experts from the german bank Baader Helvea. The weak specifications of Wall Street spoiled the mood of investors in this country. “The big unknown is and remains the interest rate of the Fed, which continues to cause deep concerns among investors and thus unsteady and volatile price developments,” summarized the strategists at Raiffeisen Research. The US stock exchanges opened on Friday with slight price losses, as the Dax went into weekend. While a rise in US 10-year Treasury yields hurt tech stocks like Amazon, Apple, and Tesla. These fell between 0.9 and 2.8 percent.

Adidas stock plummets because of Kanye West
The abrupt separation from the scandalous rapper resulted in cuts in sales and profits – more clearly than expected.

The Adidas share ended the trading week deep in the red. It was the most desastrously trading day, since march 2020 – while the cornona virus outbreak.
The title of the sporting goods manufacturer fell by almost eleven percent on Friday. This is the largest daily loss since the beginning of the corona pandemic in March 2020. The separation from the scandalous rapper Kanye West and his fashion brand “Yeezy” this year puts Adidas in the red for the first time since 1992. The new CEO Björn Gulden announced an operating loss of up to 700 million euros. The Dax group loses 1.2 billion euros in sales and half a billion euros in profit just by eliminating the expensive sneakers. On average, analysts had expected billions in profit for 2023. Baader Helvea analyst Volker Bosse wrote of “a terrible forecast. The cut in sales and profits will be far deeper than anyone anticipated.”Adidas is probably stuck with huge stocks of its “Yeezy” collection. That could result in depreciation of several hundred million euros for the group. The stock is going down. The separation from the scandalous rapper Kanye West will probably put the sporting goods group Adidas in the red in the current year. On the Frankfurt Stock Exchange, shares have collapsed and are thus heading for the redest trading day since the beginning of the corona pandemic in March 2020.

In the worst case, an operating loss of 700 million euros can be expected in 2023,
in the best case a black zero, the number two in the world market for sports shoes and clothing announced on Thursday evening.
The main reason: Adidas ended its collaboration with West last year after he had repeatedly attracted attention with verbal abuse and anti-Semitic statements. Adidas imposed a sales stop for the “Yeezy” brand designed by the rapper, which had brought billions in sales and high margins for years. This means that the company is missing 1.2 billion euros in sales and an operating profit of 500 million euros in the new year. Customers paid several hundred euros each for “Yeezy” shoes and clothing. The end of the partnership had already cost Adidas 250 million euros in profit in the Christmas business. Adidas has so far left open what will happen to the inventory that has already been produced but taken off the shelves. If it is no longer sold, it would have to be written off by 500 million euros, according to the group. “Adidas has had multiple social media fails,” commented one retailer. In an highly volatile, mood-driven market, you have made yourself dependent on one person for the long term and are now suffering the consequences.

However, overall, Adidas is preparing for a drop in sales of up to nine percent in the current year.
That would be around two billion euros less than in 2022. Last year, currency-adjusted group sales increased by one percent to 22.5 billion euros. The operating profit collapsed by more than two thirds to 669 million euros. The bottom line is that only 254 million euros remained in 2022. For the current year, analysts had previously expected profits in the billions – but nothing will come of it. The new CEO Björn Gulden, who changed from Puma at the beginning of the year, described 2023 as a “year of transition”. “We’re not performing as well as we should at the moment,” said the manager. His predecessor Kasper Rorsted came under increasing pressure in the summer and left early at the end of the year. The guilder, which received advance praise on the stock exchange, now wants to spend up to 200 million euros so that Adidas can grow profitably again from 2024. “We have to put the pieces back together, but I’m convinced that we can make Adidas shine again,” said Gulden. “But we will need some time for that.”

Fundamentally “undervalued”
Technical indicator RSI “neutral”
And/Or No Dividend Stock; that`s why “sell”
These is a systematic 4XSetUp Technical Analysis about the german Adidas share

In our view, Adidas is undervalued compared to the industry average (textiles, apparel and luxury goods). The stock trades at a price-to-earnings (P/E) ratio of 33.27, giving it a 69 percent gap to the industry P/E of 108.7. This results in a “buy” recommendation on a fundamental basis.

In order to assess whether a security is currently “overbought” or “oversold”, the upward and downward movements can be compared over time. This provides the so-called Relative Strength Index (RSI), an indicator from technical analysis which is often used in the financial market. We now rate Adidas based on the shorter-term RSI of the last 7 days as well as the slightly longer-term RSI on a 25-day basis. First the 7-day RSI, which currently stands at 32.13 points, which means that Adidas stock is neither overbought nor oversold. As a result, it receives a “Hold” rating. Now to the RSI25: Again, Adidas is neither overbought nor oversold (value: 34.38), so the stock also receives a “hold” rating for the RSI25. This gives Adidas a “Hold” rating for this point in our analysis.

Adidas currently pays out lower dividends than the apparel and luxury goods industry average. The difference is 21.34 percentage points (2.25% vs. 23.59%). Because of this large difference, the stock’s dividend policy earns a Sell rating.