Under Armour stock price target cut to $9 at BMO Capital

On Tuesday, BMO Capital Markets adjusted its outlook on Under Armour Inc. (NYSE:UAA) shares by reducing the price target from $12.00 to $9.00, while still maintaining an Outperform rating on the company’s stock. Currently trading at $5.80, the stock has shown significant momentum with a 7.7% gain over the past week. The adjustment follows Under Armour (NYSE:UA)’s recent quarterly report, which indicated another period of improved gross margins (47.5%) despite lower revenues. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.

The firm’s analysts have expressed approval of Under Armour’s current strategy, which prioritizes the company’s financial health over aggressive expansion. The approach, aimed at re-elevating the brand, is expected to lead to margin expansion as a result of management’s efforts, even if it means controlling revenue growth in the short term. BMO Capital’s commentary highlighted the importance of gross margin improvements as a key factor for the company’s future success. InvestingPro data shows the company maintains a healthy current ratio of 2.01, with liquid assets exceeding short-term obligations.

Under Armour’s latest financial results showed a deliberate move by management to reset the business, focusing on building a stronger foundation rather than pushing for immediate revenue growth. This strategy is seen as a necessary step for the company to achieve long-term stability and profitability.

The analysts also anticipate that Under Armour will achieve savings in selling, general, and administrative expenses (SGA), which should contribute to the overall financial health of the company. While recognizing that investors are eager for signs of revenue stabilization, BMO Capital believes that Under Armour’s emphasis on a healthy business structure is a positive sign.

In summary, BMO Capital Markets has reaffirmed its positive stance on Under Armour’s stock, despite a decrease in the price target. The firm remains optimistic about the company’s potential for margin expansion and the effectiveness of its current business strategy.

In other recent news, Under Armour has seen a series of significant developments. Moody’s Ratings downgraded Under Armour’s corporate family rating to Ba3 from Ba2, citing expectations of decreased earnings over the next 12-18 months due to weakened consumer discretionary spending and increased tariff costs. This downgrade also affects the company’s probability of default rating and senior unsecured notes rating, with the outlook remaining negative. In a move to strengthen its strategic direction, Under Armour expanded its Board of Directors by adding three new members: Dawn N. Fitzpatrick, Eugene D. Smith, and Robert J. Sweeney, each bringing expertise from finance, sports management, and investment. Meanwhile, Under Armour, along with other major footwear companies, has requested tariff exemptions from the U.S. government, arguing that current tariffs could significantly increase costs for American consumers and potentially lead to business closures. The group emphasized that existing tariffs have not incentivized domestic production but have resulted in higher consumer prices. The footwear industry representatives warned of potential job losses and reduced consumer spending if tariffs continue to rise. These recent developments highlight the challenges and strategic adjustments Under Armour is navigating in the current market environment.

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