UPDATE: Telsey Downgrades Under Armour, Inc. (UAA) to Market Perform

Telsey analyst Cristina Fernandez downgraded Under Armour, Inc. (NYSE: UAA) from Outperform to Market Perform with a price target of $8.00 (from $12.00).

The analyst comments "In recent weeks, both adidas and Nike have called out high inventory across the marketplace and the need to increase promotions to clear goods, leading to downward revisions to their financial outlooks. Nike, in particular, has higher inventory in apparel (which accounts for ~70% of Under Armour sales) including many spring/summer/fall items that arrived late. In addition, while both brands are still seeing YoY growth, adidas noted a slowdown in Western markets beginning in September. Under Armour's inventory has been leaner than most competitors and the company lowered its 2022 outlook to reflect higher promotions, but we believe the environment has worsened since the company's last report on August 3 and promotions are deeper than expected. Recall that Under Armour's FY23 gross margin outlook for down 375-425 bps to 45.3%-45.8% included 100 bps of pressure from higher promotions, 100 bps from higher freight and product costs, 100 bps from unfavorable product mix, and 50 bps from FX, partly offset by pricing and supply chain efficiency. As such, it is likely Under Armour cuts its 2022 outlook again when it reports 2QF23 earnings on November 3. Given the pressures being faced by the sporting goods brands and Under Armour's positioning in the marketplace—with slower sales growth and more apparel exposure—we are downgrading our rating to Market Perform from Outperform. The appointment of a new CEO remains a potential positive catalyst, but likely not enough to offset the industry backdrop. Our 12-month price target moves to $8 from $12, based on applying a P/E multiple of 15x (down from 20x) to our revised FY24 EPS estimate of $0.55 (down from $0.60)."

For an analyst ratings summary and ratings history on Under Armour, Inc. click here. For more ratings news on Under Armour, Inc. click here.

Shares of Under Armour, Inc. closed at $6.62 yesterday.

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