CFRA raises Under Armour stock price target to $5 from $4

On Thursday, CFRA analyst Zachary Warring updated the firm’s outlook on Under Armour (NYSE:UA), Inc. (NYSE:UAA) by increasing the price target to $5.00 from the previous $4.00, while still maintaining a Sell rating on the company’s shares. According to InvestingPro data, UAA currently trades at $8.23, with analyst targets ranging from $4 to $15, reflecting the market’s divided outlook on the stock. The revision comes despite a maintained negative stance on the stock, as Warring explained, "We lift our 12-month price target by $1 to $5, based on 14.3x our FY 26 (Mar.) EPS estimate and below the company’s three-year average forward P/E multiple of 19.8x."

Warring’s assessment reflects a belief that Under Armour does not warrant a higher multiple compared to its peers, noting the company has not experienced significant growth over the past decade and continues to underperform relative to its competitors across various operating metrics. InvestingPro’s analysis shows the company’s overall Financial Health score is "FAIR" at 2.11 out of 5, with revenue declining by 7.89% over the last twelve months. The price target adjustment incorporates an increased FY 25 EPS estimate, which has been raised by $0.05 to $0.30, while the FY 26 EPS estimate remains constant at $0.35.

Under Armour recently reported its Q3 earnings, posting a normalized EPS of $0.08, which was $0.05 higher than consensus estimates. The company’s revenue for the quarter was $1.40 billion, surpassing estimates by $62 million despite falling short of the previous year’s $1.49 billion. The performance across different regions was mixed, with North America sales dropping by 8%, EMEA climbing by 5%, APAC decreasing by 5%, and Latin America sales falling by 16%.

An improvement in the company’s gross margin was observed during the third quarter, expanding by 240 basis points year-over-year to 47.5%. This was attributed to reduced discounting in direct-to-consumer sales, lower product and freight costs, and favorable foreign exchange rates. Warring also highlighted the strength of Under Armour’s balance sheet, which he suggests provides the company with the flexibility to engage in share buybacks. Indeed, InvestingPro data confirms this financial stability, showing a healthy current ratio of 2.18 and moderate debt levels with a debt-to-equity ratio of 0.67. For deeper insights into UAA’s financial health and future prospects, investors can access comprehensive Pro Research Reports covering 1,400+ top stocks on InvestingPro.

Despite these positive elements, CFRA maintains a cautious perspective on Under Armour’s stock. Warring’s commentary concluded with a note on the company’s valuation, stating, "We remain negative as shares trade at 22x FY 26 EPS estimates," indicating skepticism about the stock’s current pricing in the market. The stock has shown significant volatility, with InvestingPro data showing a 27.36% price return over the past six months, despite current profitability challenges.

In other recent news, Under Armour, Inc. has been the subject of various analysts’ reports. Citi analysts maintained a Neutral rating on Under Armour, projecting that the company will surpass third-quarter earnings per share (EPS) estimates due to improved gross margins and lower selling, general, and administrative expenses. The analysts also anticipate an increase in fiscal year 2025 EPS guidance following Under Armour’s third-quarter performance. However, they noted that sales continue to struggle, particularly in North America, with an expected 13% decline in fiscal year 2025.

UBS analyst Jay Sole adjusted the price target for Under Armour shares to $15.00, while sustaining a Buy rating on the stock. Sole anticipates that stronger holiday sales and improvements in gross margin could help mitigate risks from foreign exchange pressures. Meanwhile, Argus analysts downgraded Under Armour from Buy to Hold, citing ongoing challenges post-pandemic and a continued decline in revenue across product lines.

Raymond (NSE:RYMD) James reiterated a Market Perform rating on Under Armour, following the company’s 2024 Investor Day. The strategic plan included a focus on innovation, particularly in footwear, and restructuring the organization to enhance execution. However, they expressed caution, noting that turnarounds require time. These are among the recent developments concerning Under Armour.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.