Allbirds could be a speed bump for the company

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Allbirds could be a speed bump for the company

Analysts are in agreement with the disruptive potential of the Allbirds Inc. brand, though JPMorgan says tough competition from the giants in the athletic world could be a speed bump to that momentum.

Allbirds is competing with highly established and scaled players in the lifestyle apparel category, including Nike and Lululemon LULU. The initiation note published Monday shows that the company is expected to launch footwear in 2022, according to analysts.

There is a threat from larger incumbent players such as Nike Adidas investing heavily in similar natural sustainable materials commercialization capabilities, noting Allbirds doesn't maintain patents on the materials or design, which could affect Allbirds competitive positioning, they wrote.

Allbirds stock was trading on November 3, 63% above its $15 IPO price in its debut. The shares ended Monday at $18.82.

The Renaissance has gone up 0.5% for the year to date, while the benchmark S&P 500 index SPX has run up 24% for the period.

Allbirds is focused on being eco-friendly in the fashion world, with sustainable fabric innovation a core area of the business.

See Allbirds IPO: 5 things to know about the newly public eco-friendly shoe company.

Both Nike NKE and Adidas ADS have taken steps into sustainable processes and merchandise. For example, Nike launched a refurbished sneaker program earlier this year. In October Adidas announced a partnership with resale business ThredUp Inc. TDUP, and previously partnered with Allbirds for a launch in 2022.

Allbirds focus on sustainability is viewed by research groups as a growth driver for a company that is starting with low name recognition.

Allbirds is developing solutions for CO 2 reduction and materials innovation non-synthetics that are disrupting the softlines industry, which creates meaningful product differentiation and separation in our Truvalue ESG related scoring metrics, wrote Cowen analysts in their initiation.

According to our proprietary survey, 82% of consumers aged 18- 34 view the social impact and sustainability of a brand as being either very important 40% or somewhat important 42% Cowen rates Allbirds stock at over the $24 price target, with a $24 price target. Cowen also gives Allbirds an ESG score of 60 out of 100. According to the research group, a score of 50 represents a neutral impact.

Also, Dick s Sporting Goods partners with Nike for digital rewards platform.

Allbirds is a sustainability pioneer, and the brand ethos aligns with consumer expectations.

There are megatrends for conscious consumerism and casualization, according to analysts.

The direct-to- consumer DTC business model of Allbird gives the company an advantage.

The digital and retail DTC model supports both more product value for the consumer and more profit per unit for Allbirds, according to Stifel.

Morgan Stanley started coverage of Allbirds with a buy stock rating and $23 price objective.

Allbirds' digitally-led retail distribution strategy has resulted in a deep understanding of its customer and 98% of sales at full price. KeyBanc Capital Markets has been following Allbirds from its early days, and says that the company's origins in sustainability will be an asset going forward.

The still dominant trend of wholesale and the difficulty in developing and working with sustainable and high-performing materials makes it hard to adopt this construct within the lifestyle brand space, analysts said.

We believe Allbird's structure as a DTC brand gives it the freedom to adopt sustainability as a core product attribute across the entire line of products.