Buckingham Research Sees 29% Upside in Under Armour (UA) and Raises Rating to 'Buy'

(Updated - June 20, 2016 9:22 AM EDT)

Buckingham Research upgraded Under Armour, Inc. (NYSE: UA) from Neutral to Buy with a price target of $48, implying upside of 29%. Analyst Scott Krasik said Under Armour is the best growth story in consumer, and he thinks the company is under-earning.

"While UA and the industry overall will continue to see elevated promotions at retail related to the Sports Authority liquidation likely through the BTS season, we believe that pricing will stabilize in 4Q16 creating a catalyst for the stock as margins improve setting up UA for EPS upside in FY17 when it also begins to materially expand distribution," said Krasik.

The analyst added, "In our view, UA is currently underearning as it 1) lacks economies of scale in footwear and international 2) is overspending on marketing and 3) operating a sub-optimal supply chain as it has prioritized growth over execution up to this point. We believe UA is the best growth story in consumer though and will overcome these issues over the next few years. While it is always a challenge to find the perfect entry point for high multiple growth stocks, the recent pullback (-21% vs S&P 500 -1% since 4/22) and current valuation (FY2 P/E in-line with its 5-year average of 44x), in our view, present a compelling buying opportunity. At current levels, we see the risk/reward as favorable (15% downside/39% upside)."

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 $37.22 yesterday.

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