Stronger revenues win the day Adidas'' Q1 results beat on both sales and profits. It''s very early days in the recovery, with inventory levels still elevated, but the market took this as an early win. There are signs of momentum building and consensus expectations for 2024 appear too low to us. However, investor expectations are higher and we estimate using reverse-DCF that the stock is already pricing in over 12% operating margins. We maintain Neutral and prefer to play stronger wholesale trends through JD Sports (+). Momentum building, and that''s what matters most There is plenty of work for Adidas to do. It does not expect to have cleaned its inventories until the end of Q3 and is still considering 3-4 scenarios of how to exit its EUR 500m Yeezy inventory position. However, flat sales in Q1, double-digit sell-out in China and momentum in the ''terrace'' footwear trend are all encouraging. In addition, as CEO Bjorn Gulden says, in basketball its Fear of God Athletics collaboration could be a ''game-changer''. 2024 and 2025 - that''s the prize Management has not set out its medium-term goals: it is likely to do this at a CMD in November or March. However, it is sticking to its 2023 guidance (underlying EBIT of nil) to clean the decks for a better 2024. Management is confident of delivering 10% margins but is not setting a date - clearly 2025 is in play for this, however. Consensus only models 7% in 2025, below our own 8.6%, but we think investor expectations are higher than this. Raising TP but stick on Neutral EPS is rather meaningless for 2023 but we raise our underlying EBIT forecast (prior to EUR 700m of exceptionals) to EUR 107m, ahead of management''s ''nil'' guidance. Our target price rises to EUR 165, which is based on a DCF valuation with 12% long term margins. We estimate that the shares are already pricing in margins above this level, and maintain our Neutral rating.