UBS maintains Puma stock Neutral with EUR43.90 price target

On Monday, UBS reiterated a Neutral rating on Puma SE (PUM:GR) (OTC: PMMAF (OTC:PMMAF)) with a consistent price target of EUR43.90. The firm’s analyst pointed out that Puma is encountering several obstacles, including increased costs that have shifted from being margin tailwinds to headwinds. With a gross profit margin of 47.3% and revenue of $9.5 billion in the last twelve months, competition is growing in the wholesale channel, and the brand’s momentum seems to be slowing down.

The analyst indicated that Puma’s shift in sales strategy towards the direct-to-consumer (DTC) channel, which typically offers lower margins, was one of the main reasons for a more cautious stance on the stock since last year. This pivot could make it challenging for Puma to meet its short-term and long-term margin goals, despite the company’s efficiency program. InvestingPro subscribers can access detailed margin analysis and 6 additional key insights about Puma’s financial health.

Puma’s year-to-date performance shows a significant decline, with the stock value dropping by 31%. Trading at a P/E ratio of 17.7x and maintaining a healthy current ratio of 1.45, the current valuation of Puma’s shares is at historical lows, which might offer some short-term support for the stock price. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model. The analyst expressed concerns about the long-term outlook for the company, which may limit potential gains.

UBS has decided to keep its estimates for Puma largely unchanged. This decision comes after considering the company’s pre-release information, which highlighted the various challenges Puma is facing in the current market environment. The analyst’s comments reflect a cautious perspective on Puma’s ability to navigate through these issues and achieve its financial targets, though InvestingPro data indicates the company remains profitable with positive earnings expected this year.

In other recent news, Puma SE has been the subject of analyst attention with Citi revising the company’s stock price target to €32.00 from the previous €45.20, maintaining a neutral stance. The adjustment came in the wake of Puma’s fourth-quarter pre-release for fiscal year 2024. Citi’s revised outlook includes a reduction in Puma’s expected sales growth for fiscal years 2025 and 2026 to 6.9% and 5.6%, respectively, and a decrease in the expected EBIT margin for the same years to 7.4% and 7.0%.

In line with these changes, the analyst’s earnings per share (EPS) estimates for fiscal years 2025 and 2026 have been reduced by 17% and 24%, respectively. These revisions are attributed to a cautious outlook on management’s ability to achieve significant cost savings and enhance the brand’s prestige amid ongoing industry challenges.

In contrast, CFRA initiated coverage on Puma with a Hold rating and a 12-month price target of EUR49, highlighting the company’s strong global brand recognition and commitment to sustainability. Puma’s financial targets for 2024, which include mid-single-digit currency-adjusted revenue growth and Earnings Before Interest and Taxes (EBIT) between EUR620 million and EUR670 million, were noted as promising recent developments.

Despite potential challenges such as economic headwinds and subdued consumer sentiment, CFRA forecasts Puma’s Earnings Per Share (EPS) to be EUR2.15 for 2024, increasing to EUR2.80 by 2025. These developments underscore the recent analyst focus on Puma SE and its financial outlook.

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