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On Thursday, BNP Paribas (OTC:BNPQY) Exane analyst Warwick Okines downgraded Puma SE shares, listed on the Frankfurt Stock Exchange (PUM:GR) and over-the-counter (OTC: PMMAF (OTC:PMMAF)), from Outperform to Neutral and set a price target of EUR 25.00. The adjustment reflects concerns over the sportswear company’s near-term financial outlook and the potential for declining profits in the coming quarters. The stock has already declined significantly, falling nearly 24% in the past week and 45% over the last six months. InvestingPro data shows three analysts have recently revised their earnings estimates downward for the upcoming period.
The downgrade follows Puma’s profit warning issued in January, which initially led Okines to consider the lower valuation multiple as a potential opportunity for upside. However, the recent guidance from Puma’s management, which anticipates profits to fall short of consensus due to deteriorating sales trends and unfavorable currency impacts, has altered this view. Despite the challenges, InvestingPro analysis indicates the company remains undervalued relative to its Fair Value, with strong fundamentals including a healthy current ratio of 1.45 and positive free cash flow yield of 15%.
Okines expressed apprehension about the company’s profitability, suggesting that Puma may experience a downturn in earnings for several consecutive quarters. The analyst cited the current low visibility into the company’s future performance as a key reason for the downgrade to a Neutral rating.
Puma’s updated profit guidance, which is below market consensus, indicates that the company is facing challenges that could limit its ability to achieve a positive re-rating in the stock market in the near term. The revised price target of EUR 25.00 from BNP Paribas Exane represents the firm’s adjusted expectations for Puma’s stock performance.
Investors and market watchers will be keeping a close eye on Puma’s forthcoming financial results and any further updates from the company regarding its sales trends and strategies to navigate the current economic environment.
In other recent news, Puma SE has been the subject of notable analyst updates and financial forecasts. UBS has maintained a Neutral rating on Puma with a price target of EUR 43.90, citing challenges such as increased costs and heightened competition in the wholesale channel. The firm also highlighted Puma’s shift towards a direct-to-consumer sales strategy, which typically offers lower margins, as a reason for its cautious outlook. Meanwhile, Citi has adjusted its price target for Puma SE to EUR 32.00 from EUR 45.20, while also maintaining a Neutral rating. This revision follows Puma’s fourth-quarter pre-release for fiscal year 2024 and reflects a decrease in expected sales growth and gross margins for fiscal years 2025 and 2026.
Citi’s report indicates a reduction in sales growth forecasts for 2025 and 2026 to 6.9% and 5.6%, respectively, down from previous estimates of 9.8% and 7.6%. The strength of the Euro and ongoing promotional activities have contributed to a lowered forecast for the currency’s impact on revenue and gross margins. Additionally, the expected EBIT margin for 2025 and 2026 has been cut to 7.4% and 7.0%, respectively, due to reduced operational leverage. Consequently, earnings per share estimates for these years have been reduced by 17% and 24%. Both UBS and Citi express concerns about Puma’s ability to meet its financial targets amidst these challenges.
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