Under Armour (UAA) Soars After Being Upgraded at Three Wall Street Firms on Turnaround Growth Fueled by Robust Demand
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Yesterday, UAA delivered a beat-and-raise on strong demand for its sports apparel products. Most notably, the company more than doubled its EPS full-year guidance.
This hasn’t gone unnoticed as UBS analyst Jay Sole upgraded the stock to “Buy” from “Neutral” and raised the price target to $36.00 per share from $26.00 as he expects “margin-driven EPS beats over the coming quarters to cause the market's view to move closer to our own.” The higher PT reflects raised EPS estimates for FY21, FY22, and FY23.
“Under Armour's brand name isn't as strong as those of the industry leaders, but it is stronger than many give it credit for. Under Armour has global brand name recognition and we think the company will leverage this asset to drive strong growth outside the US. Plus, the company's effort to restructure over the last four years has created a better base off which to grow by eliminating unhealthy, low-margin businesses and better segmenting the marketplace,” the analyst writes in a research memo.
Similarly, Atlantic Equities analyst Daniela Nedialkova upgraded the stock to “Neutral” from “Underweight” citing turnaround progress. Still, a price target ($24.00) is about 8% lower than the current market price of $26.15.
“The last two quarters have shown solid and convincing progress on the operational turnaround of Under Armour. We still see the brand as positioned less favourably than its bigger peers to take advantage of the currently enhanced growth opportunities, and specifically in terms of the current product pipeline / innovation. However, we see enough progress on operational metrics in recent quarters to become more positive on the sustainability of the turnaround. While there is still more clean-up to be done, we now see the company as convincingly on the right track for long-term improvement,” the said in a memo.
Barclays analyst Adrienne Yih also moved to upgrade the stock to “Overweight,” citing three key drivers behind the call:
1) a significant positive inventory inflection, 2) a return to high-quality sales growth in NA, and 3) the opportunity for multiyear OM expansion from current levels as topline growth leverages the fixed cost infrastructure.
“We believe that with much of then heavy lifting completed in terms of right-sizing inventory and exiting undifferentiated /off-price doors, the company is positioned to focus on full-price brand rebuilding from a much healthier base. By driving growth in the DTC channel, UAA has more control over the consumer brand perception, coupled with the analytics to drive stronger product innovation and higher ROI marketing spend. With the accelerated shift to e-commerce, the increased focus on health and wellness, and a return to athletics for schools, we believe UAA is poised to deliver upside to conservative FY21 guidance of 4.5% EBIT margin in FY21,” the analyst said.
Barclays has a new $34.00 per share price target on UAA, up from the prior $25.00.
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Create E-mail Alert Related CategoriesAnalyst Comments, Upgrades
Related EntitiesUBS, Barclays
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