Adidas Faces Downgrade as RBC Cites Slowing Growth Amidst World Cup Hype

RBC Capital Markets has downgraded sportswear giant Adidas AG to "sector perform" from "outperform," citing concerns over slowing underlying growth and elevated consensus expectations for 2026. The brokerage also reduced its 12-month price target for the company's shares, leading to an immediate dip in stock value.

Key Takeaways

• RBC downgrades Adidas to "sector perform" due to limited upside catalysts and overly optimistic 2026 forecasts.

• The firm lowered its 12-month price target to €160 from €190.

• RBC anticipates slower organic revenue growth and lower EBIT margins than market consensus.

• The World Cup's impact is seen as a temporary boost, masking a decelerating underlying trend.

Concerns Over 2026 Projections

RBC's report indicates that current expectations for Adidas' 2026 performance are overly optimistic when compared to the brokerage's own forecasts. RBC projects a 2026 organic revenue growth of 7%, which is approximately 4 percentage points below the consensus. Furthermore, their forecast for adjusted EBIT stands at €2.40 billion, implying a 9.3% margin, a figure that falls about 13 percentage points short of market expectations.

The brokerage highlights that consensus forecasts are anchored around a 10% EBIT margin for 2026, whereas RBC's estimates suggest lower profitability. This divergence is a primary driver behind the downgrade.

Underlying Growth Trends

The downgrade specifically addresses a decelerating underlying revenue trend for Adidas, even when factoring in the anticipated boost from the 2026 World Cup. RBC forecasts that Adidas' underlying organic revenue growth will slow to 3% in 2026. The World Cup is expected to contribute an additional 4 percentage points, bringing the total organic growth to 7%.

RBC attributes this slowdown to the increasing size of Adidas' revenue base and what they describe as the maturation of the brand cycle. The firm believes that expectations for margin expansion are largely already priced into current estimates.

Valuation and Future Catalysts

While RBC acknowledges that Adidas' current valuation remains below historical levels, they see limited visibility on near-term catalysts that could drive a significant re-rating of the stock. The brokerage has reduced its 2026 revenue forecast by 4% and its EBIT estimate by 8%, consequently lowering projected earnings per share by 10%. This adjustment is partly due to a reduced assumption for share buybacks.

RBC's analysis suggests a gross margin of around 52% and anticipates that operating expenses as a share of sales will not fall substantially below 42%-43%. This implies an EBIT margin range of 8%-11% over the business cycle.

Sources

• RBC downgrades Adidas on slowing underlying growth despite World Cup boost By Investing.com, Investing.com.