Puma: Lack of Earnings Momentum to Weigh on Stock

UBS has adjusted its outlook for Puma, lowering the price target from EUR 51 to EUR 48.50 in a note this week and maintaining a Neutral rating on the shares.

This revision follows a series of downgraded earnings projections and recent underperformance in the market.

The primary concern highlighted by UBS is Puma's lack of earnings momentum, which is expected to impact both the stock and its valuation negatively.

The analysts at UBS have reduced the firm's earnings per share (EPS) estimates for 2024, 2025, and 2026 by 8%, 7%, and 7%, respectively. This downgrade indicates a re-evaluation of Puma's future profitability.

Additionally, last week's disappointing results from Nike (NKE) have a mixed effect on Puma. UBS says that while Nike's poor performance might temporarily reduce the competitive pressure in the wholesale channel, it does not alleviate the broader concerns regarding Puma's financial trajectory.

UBS argues that despite this slight reprieve, Puma's overall lack of earnings growth will continue to weigh heavily on investor sentiment and the stock's market performance.

UBS's analysis suggests that investors should be cautious about Puma's near-term prospects, given the reduced earnings estimates and the ongoing challenges within the competitive landscape. The lowered price target reflects these concerns and underscores the need for Puma to generate more robust earnings momentum to improve its valuation and market standing.

Earlier this year, Barclays initiated coverage of Puma with an Equal Weight rating and EUR 42 price target, telling investors that they expect the operating environment for the company to remain challenging in the first half of 2024 as consumers remain cautious.