JPMorgan has shifted its stance on several European sportswear and footwear stocks, restarting coverage on Adidas and On Holding with Overweight recommendations and placing Puma and JD Sports at Neutral. The bank said a delayed rebound at Nike should allow current market share gainers additional time to consolidate their positions.
The bank's analyst, Wendy Liu, wrote that she anticipates "a slower Nike comeback to extend the window for current market share winners to keep winning."
JPMorgan's near-term financial projections include expected second-quarter topline growth of 14% and EBIT growth of 16% for Adidas, and a forecast of 26% topline growth coupled with 45% adjusted EBITDA growth for On. The firm assigned a price target of 230 to Adidas and $51 to On, both targets set with a December 2027 time horizon.
On was also placed on "Positive Catalyst Watch" by JPMorgan, with the bank citing the potential for above-consensus second-quarter delivery and the possibility of further upward guidance.
Liu characterises the sector as divided between two groups. The first, a "Consistent-Delivery" camp that includes Adidas and On, has delivered steady results but has seen valuation multiples compress. The second, a "Reset & Rebuild" cohort that includes Puma and JD Sports, carries lower expectations after company-specific turnaround initiatives.
According to JPMorgan, shares of the consistent-delivery companies have underperformed those of the reset names over the past 12 months, even while earnings-per-share estimates for Adidas and On have moved higher. The bank notes that Adidas and On currently trade at approximately 14x and 16x, respectively, on a two-year forward price-to-earnings basis.
"We expect a consistent delivery of earnings growth over the coming quarters to support an upward re-rating of both companies," the analyst wrote, indicating the potential for valuation improvement if results remain steady.
Puma was upgraded to Neutral from Underweight and given a 26 price target. JPMorgan highlighted that a 29% stake acquisition by China's Anta Sports creates "attractive takeover optionality" and helps cap near-term downside. At the same time, the bank forecasts a 9% constant-currency sales decline for Puma in the second quarter and anticipates a 61 million EBIT loss for that period.
JD Sports was initiated at Neutral with a 90 pence price target. JPMorgan noted that recent reset actions have lowered the earnings bar for JD Sports, but the bank does not expect an immediate inflection in profit growth, citing continued exposure to a still-struggling Nike and a promotional retail environment in the U.K. and across Europe.
Across the sector, JPMorgan flagged the persistence of promotional activity into the third quarter as a headwind. It also identified several offsetting tailwinds: demand related to the ongoing World Cup, easing freight costs and a softer U.S. dollar, which the bank expects will support margins through 2027.
Clear summary
JPMorgan resumed coverage on Adidas and On with Overweight ratings and set price targets of 230 and $51, respectively, for December 2027. Puma and JD Sports were rated Neutral, with Pumas outlook supported by a significant stake purchase by Anta Sports but still forecast to see sales decline and an EBIT loss in the second quarter. The bank expects sector dynamics to remain split between consistent performers and those undergoing a reset, while a slower recovery at Nike extends opportunities for rivals.
Key points
- JPMorgan forecasts Q2 topline and profit improvements for Adidas (14% revenue, 16% EBIT) and stronger gains for On (26% revenue, 45% adjusted EBITDA).
- Adidas and On were reinstated with Overweight ratings and trade at roughly 14x and 16x two-year forward P/E, respectively; price targets are 230 for Adidas and $51 for On (Dec 2027).
- Puma and JD Sports were placed at Neutral - Puma has takeover optionality after Anta Sports 29% stake purchase but faces a forecasted 9% sales decline and a 61 million Q2 EBIT loss; JD Sports has a lower earnings bar but no near-term profit inflection expected.
Risks and uncertainties
- Promotional pressure: JPMorgan flagged a promotional environment continuing into the third quarter that could compress margins and affect retail profitability - relevant to retail and consumer discretionary sectors.
- Company-specific execution risk: Firms in the "Reset & Rebuild" group, such as Puma and JD Sports, face uncertainty around turnaround progress and near-term profit recovery - relevant to investors focused on operational turnarounds in retail and apparel.
- Macroeconomic and cost dynamics: While easing freight costs and a softer U.S. dollar are cited as margin supports through 2027, persistence of adverse cost or currency movements could alter that outlook - relevant to multinational retailers and supply-chain exposed companies.
Bottom line
JPMorgan's move to favor Adidas and On reflects a view that steady delivery by these companies, combined with a delayed Nike rebound, creates a window for sustained share gains. Puma and JD Sports are treated more cautiously while their restructurings and market exposures play out. Market participants will watch upcoming quarterly delivery and any guidance revisions closely, particularly for On while it sits on Positive Catalyst Watch.