Cowen Weighs Puma's Market Share Opportunity Against Potential Athletic Apparel Slowdown, European Concerns

Amid the rise of sportswear and the fall of performance apparel, Puma AG Rudolf Dassler Sport PMMAF the quintessential casual sportswear brand, is properly positioned for the trend, according to Cowen. 

The Analyst 

Analyst John Kernan initiated coverage of Puma's German stock with a Market Perform rating and €454.00 ($520.71) price target.

The Thesis

Puma’s global relevancy is rising and the brand is reaching an inflection point, Kernan said in the Friday initiation note. 

The arrival of CEO Bjorn Gulden, other key management additions, collaborations and the rollout of the brand’s “Forever Faster” strategy come at the same time as a "massive" inflection in the brand’s execution, product cycle and engagement with consumers, the analyst said. 

Puma shares have gained 128 percent since December 2015.  

A competitive global footwear market is the company’s biggest risk, but luckily for Puma, growth in apparel is now outpacing footwear.

Puma is showing the highest growth in Cowen's coverage list excluding Lululemon Athletica inc. LULU, and this illustrates the brand's potential for disruption and market share gains, Kernan said. 

Puma has "modest" brand preference scores, but the company has an opportunity to take market share in athletic apparel and footwear, and athletic and cultural influencers are helping raise awareness of the brand, he said. 

“High-profile collaborations with Rihanna, Selena Gomez and the naming of Jay-Z to head of basketball increases brand relevancy, along with the future 24,000-square-foot flagship on Fifth Avenue in NYC,” the analyst said. “We see significant door expansion opportunity in the U.S. wholesale channel.”

The threat of an athletic apparel slowdown keeps the analyst at a Market Perform rating, with concern over the European trajectory heading into 2019 weighing on sentiment.

The Price Action 

Over-the-counter Puma shares were trading up 0.46 percent at $531 at the time of publication Monday. 

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Photo courtesy of Puma.