UBS cuts Under Armour stock price target to $15, maintains Buy

On Tuesday, UBS analyst Jay Sole adjusted the price target for Under Armour (NYSE:UA), Inc. (NYSE:UAA) shares, decreasing it to $15.00 from the previous $16.00, while sustaining a Buy rating on the stock. According to InvestingPro data, Under Armour appears undervalued at its current price of $8.41, with analyst targets ranging from $4 to $15. The revision follows Sole’s assessment of the company’s upcoming third-quarter earnings report, scheduled for February 6, and overall performance expectations.

Sole commented on the potential impact of the earnings report, noting that Under Armour is anticipated to deliver third-quarter earnings per share (EPS) that align with current predictions. While the company hasn’t been profitable over the last twelve months, InvestingPro analysis shows a healthy gross profit margin of 46.8% and a strong current ratio of 2.18, indicating solid short-term financial stability. He mentioned that despite the additional challenges from foreign exchange pressures, which could affect Under Armour’s fiscal year 2025 revenue and margin outlook, stronger holiday sales and improvements in gross margin could help mitigate these risks.

The analyst also pointed out that the market seems to share a similar perspective, expecting no significant shifts in sell-side estimates or the stock’s price-to-earnings (P/E) ratio following the report. The options market is pricing in a potential stock price movement of approximately +/- 8.8%, which is slightly lower than the historical average move of 10.4% around earnings announcements. Sole anticipates that the actual stock movement will be less than the +/- 8.8% currently expected.

Under Armour’s guidance for fiscal year 2025 EPS is projected to stay the same, according to Sole’s base case scenario. He believes that the anticipated in-line third-quarter EPS result, coupled with the potential for gross margin improvement due to a more aggressive reduction in promotions, should support the company’s outlook.

Investors and market watchers are now looking ahead to see how Under Armour’s stock will respond following the third-quarter earnings report, with UBS’s revised price target and maintained Buy rating providing a point of reference for expectations. With a beta of 1.7, the stock shows higher volatility than the market average. For deeper insights into Under Armour’s valuation and financial health metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.

In other recent news, Under Armour has experienced mixed reactions from analysts following its recent earnings and revenue results. The company reported a decrease in Q2 revenue by 11% to $1.4 billion, despite exceeding expectations in terms of operating income and earnings per share. Argus analysts downgraded Under Armour from Buy to Hold, citing ongoing challenges post-pandemic, while TD Cowen maintained a Hold rating but raised the price target to $11, expressing optimism for a product-led turnaround.

Notably, Under Armour’s restructuring plan, aimed at brand rebuilding and anticipating new product launches in early 2025, has yet to deliver the expected turnaround. However, InvestingPro analysis indicates the company maintains strong liquidity with a current ratio of 2.18. This financial flexibility might be crucial during the transition period.

In addition to the earnings and revenue information, Under Armour has been the focus of several significant analyst ratings. Raymond (NSE:RYMD) James reiterated a Market Perform rating, while BMO Capital maintained an Outperform rating. Morgan Stanley (NYSE:MS), however, reiterated an Underweight rating on the stock. These ratings reflect varying perspectives on the company’s future prospects.

Under Armour’s recent developments include maintaining its third-quarter fiscal year 2025 and full-year 2025 guidance, with a strategy to generate higher quality revenue and elevate the brand’s status. The company is focusing on a more premium market position and enhancing its direct-to-consumer channels, which will be crucial to watch in the coming quarters.

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