Amer Sports, Inc. AS has posted a remarkable 72.4% rally in the past three months, significantly outpacing the industry’s 8.9% growth.

As of Monday, the stock closed at $19.33, just below its 52-week high of $19.73 but well above its 52-week low of $10.11. The company also outperformed other industry players like American Outdoor Brands, Inc. AOUT, Academy Sports and Outdoors, Inc. ASO and Clarus Corporation CLAR, down 2.2%, 5.9% and 30%, respectively, in the past three months.

Stock Price Performance

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Technical indicators suggest continued strong performance for AS. The stock trades above its 50-day moving average, signaling robust upward momentum and price stability. This technical strength underscores positive market sentiment and confidence in AS' financial health and prospects.

50-Day Moving Average

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Factors Favoring AS Stock

Amer Sports recently provided a business update. During the discussions, the company’s CEO James Zheng highlighted its strong growth outlook for Greater China, emphasizing the impressive performance during Golden Week, which ran from Oct. 1 to Oct. 7, 2024. Driven by robust sales across its brands, including Salomon, Wilson and Arc'teryx, Amer Sports reported a revenue increase of more than 60% year over year for the period.

This growth was particularly significant in the outdoor segment, which has shown resilience despite broader economic challenges. Amer Sports views China as a key market with considerable long-term potential, further bolstered by recent government stimulus measures.

The company is benefiting from robust Arc'teryx growth. In second-quarter 2024, Arc'teryx led the growth with high margins and continued momentum, particularly in newly introduced categories like footwear and women’s wear. This brand continues to be a standout with strong omni-channel performance and expansion, particularly in the United States, Canada and Europe.

In the second quarter of 2024, Salomon’s footwear gained significant momentum in Greater China and the broader APAC region, particularly with its Sportstyle line that blends trendy design with advanced technical features. In China, the brand introduced a new category, "Outdoor sneakers," which has struck a chord with younger consumers. In the quarter, 27 new Salomon stores were opened in Greater China, both company-owned and licensed, bringing the total to 136. By the end of 2024, Amer Sports aims to have around 200 Salomon stores in the country with substantial growth potential in Tier 1 and Tier 2 cities.

Amer Sports raised its full-year guidance, expecting revenue growth between 15% and 17%. The company now expects gross margins of 54.5%, up from its previous estimate of 54%. Adjusted operating margins are forecasted to reach the higher end of its 10.5% to 11% range, with earnings per share expected in the range of 40 cents to 44 cents.

What Might Pull Back AS Stock?

Slower growth in EMEA than in other regions remains a concern for the company. This can be attributed partly to challenges faced by the Peak Performance brand, which is undergoing a reset. Despite disciplined inventory management, in second-quarter 2024, there were some supply shortages in high-demand areas like Arc'teryx, particularly footwear. The winter sports segment, including Salomon and Atomic, faced challenges due to softer trends, particularly in North America.

AS Trading at a Premium

The company is currently valued at a premium compared with the industry’s a forward 12-month P/E basis. AS’ forward 12-month price-to-earnings ratio stands at 32.1, significantly higher than the industry’s ratio of 24.33 and the S&P 500's ratio of 22.08.

P/E (F12M)

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End Notes

Amer Sports is benefiting from strong growth in China, the success of brands like Arc'teryx and expansion efforts in key markets. Despite these strengths and positive financial outlooks, including raised full-year guidance, the stock's current valuation is notably high. Investors may want to hold the stock to capitalize on its momentum, but new buyers should exercise caution due to AS’ premium pricing and potential challenges in certain regions like EMEA and supply shortages in high-demand segments. The company currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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