Adidas stock price gains 4% on profit expectations

Adidas stock price gains 4% on profit expectations
Written by:
Michael Harris
6th August, 10:51
Updated: 6th August, 10:52
  • Adidas posted a second-quarter operating loss of 333 million EUR, lower than market estimates of 290 million
  • The firm expects an increase in operating profit of around 1 billion EUR in the Q3 amid a strong rebound
  • Adidas stock price gained 4% to trade above the descending trend line

Shares of Adidas AG (ETR: ADS) soared 4% today to hit a 2-month high after the sportswear giant said it expects a rebound in profits in the third quarter. For the second quarter, Adidas reported a big downturn in sales amid the pandemic and lockdown.

Fundamental analysis: Sales slump

Adidas posted a second-quarter operating loss of 333 million euros, failing to meet market expectations of 290 million. A wider-than-expected loss came after the firm saw its sales plunge 35% to 3.579 billion euros from 5.5 billion a year earlier. 

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Still, sales came in ahead of analyst estimates for 3.3 billion.

“We are now seeing then light at the end of the tunnel as the normalization of the physical business continues,” Chief Executive Kasper Rorsted said, who saw its contract extended for five years. 

In May and June, Adidas said it registered a double-digit growth in sales in China. Due to the lockdown measures in April, sales came in flat for the entire quarter. 

Due to a strong rebound in sales in the last two months, the German sportswear firm now expects an increase in operating profit of around EUR1 billion in the third quarter compared with the second quarter. 

This is subject to the continuation of a strong rebound trend and absence of major lockdowns. Still, Adidas didn’t provide full-year guidance amid the uncertainties related to the pandemic. 

In April, Adidas reported a 93% collapse in profits, contributing to an overall decline of 19% in the quarterly sales.

Technical analysis: Strong resistance cleared

Adidas stock price gained 4% to travel north of 250.00 for the first time in two months. The sportswear giant saw its stock plunge nearly 50% during the pandemic selloff amid its dependence on the Chinese market. 

Adidas stock daily chart (TradingView)

The stock price then recovered over half of these losses as the bulls now face strong resistance just above 250.00. This is where the 200-DMA is located at 251, in addition to a strong horizontal resistance line. However, today’s uptick in price pushed the price movements above the descending trendline, opening the door for bigger gains. The 61.8% Fibonacci retracement comes at 258.30 EUR.

Summary

Adidas share price soared 4% today to hit a 2-month high after the company said it expects a rebound in profits in the third quarter. This comes after reported a big downturn in sales for the second quarter amid the pandemic and lockdown.

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