Amer slips after China launches investigation into Tibet fireworks

Shares of Amer Sports (AS) are under pressure on Monday following news of Arc’teryx’s controversial Tibet fireworks spark backlash and as Chinese authorities launch investigation into the matter.

CHINESE PROBE: Chinese authorities launched an investigation after a fireworks show in Tibet sponsored by Amer Sports’ Arc’teryx sparked a backlash on social media because of concern about the effect on the environment, Bloomberg reports. Arc’teryx apologized and pledged remedial actions, acknowledging insufficient assessment of the boundaries of artistic expression, and will engage a professional environmental protection agency to conduct a transparent assessment.

Arc’teryx teamed up with Cai Guo-Qiang, a pyrotechnics artist, on the fireworks project dubbed “Rising Dragon” on Sept. 19 in Shigatse city, at an altitude of 5,500 meters, or 18,045 feet. According to the publication, a video of the show was released on Saturday, triggering criticism on social media that the event contradicted the outdoor brand’s image of protecting nature. Some expressed their intention to boycott Arc’teryx products. The video has since been retracted.

MOMENTUM REMAINS HIGH: Of note, Wells Fargo analyst Ike Boruchow raised the firm’s price target on Amer Sports to $38 from $35 on Monday, while keeping an Equal Weight rating on the shares. Momentum remains high, the firm says. At last week’s Analyst Day, Amer Sports provided strategic plans across product, geos and channels – issuing a new 5-year plan while notably maintaining their prior growth algorithm despite a now larger base, Wells adds.

Over the weekend, Morgan Stanley analyst Alex Straton also raised the firm’s price target on Equal Weight-rated Amer Sports to $41 from $34 following the investor day. Amer’s new long-term targets are achievable but may leave little room for upward estimate revisions, the analyst tells investors in a research note. The firm believes visibility on the company’s positive out-year estimate revisions will likely be required for further multiple expansion.

PRICE ACTION: In morning trading, shares of Amer have dropped over 5% to $35.54.