Under Armour (UAA) Sacked on Yet Another Downgrade to 'Sell'

Under Armour Inc (NYSE: UAA) (NYSE: UA) shares are down by nearly 6% this morning following another brutal analyst downgrade. This time, Macquarie Research downgraded the sports apparel maker to Underperform (from Neutral) and set a new price target of $8 (from $10). This is the second downgrade to 'Sell' since the new year started and 10th overall downgrade over the past six months.

Macquarie analyst Laurent Vasilescu highlights concerns that international growth, specifically in Asia, will not be enough to offset a potential decline in North American revenues, with expectations for a 7% fall in 2018. The lower 2018 revenues estimates for North America, drive assumptions for an overall global decline of 1% in 2018, undercutting consensus 2018 global growth estimates of 4.6%.

The Macquarie analyst also sees gross margin pressures in 2018 for UAA, while management is expected to ramp up marketing and tackle infrastructure costs, resulting in higher estimates for SG&A expenses. Vascilescu goes on to caution his clients, that UAA may need to amend credit agreement and raise capital should "revenues, gross margins and SG&A continue to deteriorate."

Furthermore, Vascilesci suggests cash-use intensive restructuring programs could be difficult due to recent Moody and S&P downgrades, coupled with the company's multi-class equity structure.

The new price target represents 47% downside from Friday's close.

StreetInsider Premium first published a variation of this article at 5:37AM ET. Try StreetInsider Premium for two weeks free here.

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