Adidas shares have lost 36 percent of their value in the past two months. Bonus certificates with a cap allow investors high returns over the next few months, not only if the price stabilizes, but also if it continues to slide.
The Adidas share has fallen sharply in recent months due to the slower than expected recovery in China and the general slowdown in consumer spending. While the share was still above EUR 170 in mid-August, on October 13, 2022 it was temporarily 36 percent lower at the year-low of EUR 109.52.
Despite the current uncertainties, the experts at RBC Capitals reiterated their buy recommendation for the Adidas share with a price target of EUR 155 due to the anticipated growth revival in the second half of the year.
The investment idea
Investors who are considering an investment in the Adidas share, which is classified as severely undervalued, at the significantly reduced price level and at the same time want to reduce the price risk of a direct share investment, could consider buying a bonus certificate with a cap as an alternative to a direct share investment. With such products, investors can achieve returns in the double-digit percentage range over the next 14 months with a significantly reduced risk of loss.
Compared to direct share purchases, bonus certificates with a cap offer investors the advantage that they enable high returns even when share prices are stagnating or falling. As a counter-trade for the attractive sideways opportunities, certificate investors have to forego the unlimited profit potential of equity investments and prospective dividend payments.
The way it works
If the Adidas share never touches or falls below the barrier of EUR 72.50 by the valuation date of the certificate, then the bonus certificate with cap will be repaid on December 22, 2023 with the bonus level of EUR 140.
The key data
The DZ Bank bonus certificate with a cap on the Adidas share (ISIN: DE000DW6KQA0) has a bonus level and cap of EUR 140. The cap defines the maximum payout amount of the certificate. The barrier activated by the valuation date, December 15, 2023, is EUR 72.50. At the Adidas share price of 110.66 euros, investors could buy the certificate for 113.42 euros.
The chance
Since investors can currently purchase the certificate for EUR 113.42, it enables a gross return of 23.44 percent (=19.25 percent per year) in 14 months if the share price has never fallen by 34.48 percent to 72, 50 euros or less.
The Risks
If the Adidas share touches the barrier at EUR 72.50 by the valuation date and the share is listed below the cap on the valuation date, the certificate will be redeemed at the closing price of the Adidas share determined on the valuation date. If this is determined below EUR 113.42, then the certificate investment will cause a loss.
This article does not constitute a recommendation to buy or sell Adidas shares or investment products based on Adidas shares. No liability is assumed for the correctness of the data.
