Amer Sports' Earnings Growth Spurs Buy Point Talk, but Valuation and Risks Loom

What happened

Amer Sports is testing a technical buy point after reporting triple-digit earnings growth in the latest quarter, highlighting strong operational momentum. This performance is backed by Q2 2025 revenue growth of 23% year-over-year and gross margin expansion to 58.5%, driven by premium brands like Arc'teryx and Salomon. However, the company's inventory has surged 29% year-over-year, increasing the risk of markdowns and working capital pressure that could undermine profitability. Management raised FY2025 guidance despite assuming a 30% incremental U.S. tariff, suggesting pricing power but also exposing the business to trade uncertainties. With the stock trading at a high P/E of 76x, much of this positive news appears priced in, urging investors to look beyond short-term gains.

Implication

The stock's elevated P/E ratio of 76x reflects optimistic expectations, making it sensitive to any earnings disappointment or growth deceleration. Elevated inventory levels pose a direct threat to gross margins if markdowns become necessary, potentially reversing recent margin improvements. Tariff pass-through remains a critical test; inability to sustain margins could invalidate the raised guidance and compress profitability. On the upside, continued brand momentum in direct-to-consumer channels supports long-term growth, but this is already factored into the current price. Therefore, maintaining a hold stance is prudent, with close monitoring of holiday sell-through and inventory trends before considering a position change.

Thesis delta

The reported triple-digit earnings growth reinforces the master report's view of strong brand momentum and operational execution, aligning with raised guidance. However, it does not mitigate the core risks of high valuation and inventory overhang, so the overall thesis remains unchanged as a hold. Investors should focus on inventory normalization and successful tariff management as key catalysts for any future upgrade.