We came across a short thesis on Amer Sports Inc (NYSE:AS) on ValueInvestorsClub by deerwood. In this article we will summarize the bears’ thesis on AS. The company’s shares were trading at $17.17 when this thesis was published, vs. closing price of $29.29 on Jan 3rd.
© https://www.amersports.com/
Amer Sports Inc (NYSE:AS) is a global group of iconic sports and outdoor brands, including Arc’teryx, Salomon, Wilson, Atomic and Peak Performance, which are known for their detailed craftsmanship, authenticity, premium market positioning and leading market shares in their categories. The company’s IPO took place in February 2024, but it remains controlled by China’s ANTA Sports.
The bear thesis is based on a series of factors that could potentially pressure the stock price. First, the author argues that Amer Sports Inc (NYSE:AS) will soon face revenue headwinds as it will be lapping some high growth comp quarters that were reported into the 2024 IPO. The upcoming tough comps are further aggravated by optimistic guidance and expectations (street is ultra bullish on AS with 25 buys and only 2 holds), while competitors have guided towards sluggish upcoming growth, including macro weakness in China. Second, AS is levered at 3.2x as of Q2’24, with limited FCF capacity that will constrain investments in regional expansion (store buildouts, marketing support) and product development and R&D. This picture doesn’t play out well given that AS trades at 42x the 2024 EPS, significantly above closest peers COLM and VFC at around 20x, and GOOS at 12x.
The author also mentions that there are several potential risks for Amer Sports Inc (NYSE:AS), that could act as catalysts for the realization of the bear thesis: as 30% of inventory is manufactured in China, the company’s margins could be adversely impacted by potential US tariffs; margins could be kept artificially high due to related-party transactions and cost-sharing with the parent company; IPO lock-up periods expired, which could exert downward pressure on stock price. Despite not mentioning a specific target price, the author emphasizes that the current valuation appears stretched and suggests significant downside potential relative to peers.
While we acknowledge the potential of AS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.