FBR Capital Sees Under Armour (UA) Sell-Off as Buying Opportunity
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FBR Capital analyst Susan Anderson reiterated an Outperform rating and $39 price target on Under Armour, Inc. (NYSE: UA) following Q3 results and the sell-off in the stock. The analyst said the lowered profit guidance provides a buying opportunity.
Anderson commented, "UA posted 3Q16 EPS of $0.29, above FBR/consensus of $0.26/$0.25, driven by +22% top-line growth, vs. FBR/consensus of +24%/+21% and guidance of 20% (see previous note for drivers). Management reiterated 2016 guidance and its long-term top-line guide of $7.5B by 2018 but lowered its EBIT outlook from $800M by 2018 to +MT growth, which implies ~$585M in EBIT. While UA lowered its long-term profit guide, we believe UA can continue to have mid/high 20% top-line growth as new distribution comes on in 2017 and footwear/international grow at accelerated rates over the next couple years (see UA Madness). With 20%-plus top-line growth, UA remains the highest growth apparel/retail company in NA, well above NKE (topline growth of +MSD/+HSD) and LULU (+LDD), and we believe as a result demands a higher multiple. Additionally, while athleticwear is slowing in NA, we see most of UA's opportunity in footwear and international markets where NKE is already significantly penetrated and LULU has less opportunity. We would be buyers on today's sell-off for significant growth over the next couple years and opportunity to return to EBIT margin expansion beyond 2018 and reiterate our Outperform rating."
Shares of Under Armour, Inc. closed at $37.90 yesterday.
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