UBS Downgrades Adidas Rating, Price Target Amid Expected Gross Margin Pressures

06:58 AM EDT, 08/05/2026 (MT Newswires) -- UBS Global Research downgraded adidas' (ADS.F) rating and price target, flagging the anticipated downward pressure on gross margins heading into 2027. "While we remain constructive on adidas' (ADS) long-term positioning under Bjørn Gulden's leadership and its ability to sustain high-single-digit growth over the medium term (UBSe +7%), we believe the market may be underestimating a growing number of gross margin headwinds in 2027-28 (UBSe ~100bps below cons.). With gross margins no longer providing the same level of support, operating leverage on the broader cost base alone may not be sufficient to drive meaningful earnings upgrades in 2027-28 (UBSe EBIT 2028 ~8% below consensus). Against this backdrop, limited scope for positive earnings revisions (beyond the one-off benefit from tariff refunds), and no clear catalysts to support a further re-rating, lead us to expect the shares to remain range-bound," according to a Tuesday note. The research firm warned that the German sportswear giant is facing a potential gross margin peak, which is limiting its scope for further market expansion amid a possible wholesale-driven 2027, as well as rising oil-related product costs, and a stronger US dollar threatening to erase recent transactional currency benefits. As such, analysts lowered the company's rating to neutral from buy and cut their price target to 173 euros from 219 euros. UBS raised its adjusted EPS forecast for full-year 2026, while reducing its EPS assumptions for 2027 and 2028. The research firm's sales estimates were also edged higher for the same three years by 1.8%, 1.6% and 0.7%, respectively.