Amer Sports: The New ONON and DECK of Consumer Discretionary?

Amer Sports (AS) shares have surged approximately 187% since its February 2024 IPO, driven by strong Q1 earnings that saw sales growth of 23% and adjusted EPS more than double to $0.27, exceeding analyst expectations and leading to increased full-year guidance. The company's success is largely attributed to its Arc'teryx brand, with technical apparel sales growing 28%, and strong performance in Greater China (43% growth) and direct-to-consumer channels (39% growth); however, its valuation is high relative to peers, suggesting that while growth opportunities exist, particularly in footwear, future returns may not match the explosive gains seen by comparable stocks like ON and Deckers.

Analysis

Amer Sports (AS) has demonstrated remarkable momentum since its February 2024 IPO, with shares appreciating approximately 187% as of late May, significantly buoyed by a robust Q1 earnings report. The company reported a 23% year-over-year sales increase, surpassing analyst expectations of sub-17% growth, and more than doubled its adjusted diluted EPS to $0.27 from $0.11, also exceeding forecasts. This performance, underscored by a strongly positive sentiment score of 0.85 for AS, prompted an increase in full-year guidance, with revenue growth now projected at 16% (up from 14%) and the EPS midpoint raised by over 4%. Key drivers include the Arc'teryx brand, which anchors the technical apparel segment that grew 28% and constitutes 45% of total revenue. Geographic expansion is also notable, with Greater China sales surging 43% (representing 25% of 2024 revenue) and Americas sales growing 12%. Furthermore, a strategic shift towards direct-to-consumer (DTC) channels, which saw 39% growth compared to 12% in wholesale, is improving margin potential. The Outdoor Performance segment, featuring Salomon, also grew 25%. Despite these strong fundamentals and growth pathways, including significant potential in the footwear market with Salomon and upcoming Arc'teryx lines, the stock's valuation appears elevated, trading at a P/E ratio of nearly 49x compared to an industry average of 29x. Current analyst price targets suggest a modest 6% upside, indicating that while AS exhibits a superior growth profile, replicating the past explosive returns of peers like ONON and DECK may be challenging from current levels.

Key Decisions for Investors

• Investors should acknowledge Amer Sports' strong operational execution and growth in key segments like Arc'teryx and DTC, but remain cognizant of its significantly elevated valuation relative to industry peers.
• Monitor the company's ability to continue exceeding increasingly high analyst expectations, particularly progress in expanding its footwear market share with Salomon and the upcoming Arc’teryx footwear launch in H2 2025.
• Given the 'high-risk, high-reward' profile and current valuation, consider a cautious approach, potentially waiting for more attractive entry points or focusing on long-term growth if conviction in sustained outperformance is high, while noting the limited near-term upside implied by current average analyst price targets.