On Friday, Telsey Advisory Group adjusted its outlook on Under Armour (NYSE:UA), Inc. (NYSE:UAA) shares, raising the price target to $10.00 from the previous $8.00 while maintaining a Market Perform rating on the stock. The revision follows Under Armour's recent financial performance, which, despite a double-digit decline in second-quarter fiscal year 2025 sales, surpassed expectations in terms of operating income and earnings per share (EPS).
The company's efforts to minimize promotions, clear the market, and reduce expenses were cited as key factors contributing to the better-than-anticipated financial results. Under Armour's CEO Kevin Plank has outlined strategic initiatives aimed at product enhancement, new product introductions, repairing wholesale relationships, and boosting the profitability of the retail fleet.
More information regarding these strategic plans is expected to be revealed during an analyst day set for December 12 in New York City. The analyst's commentary highlighted that while Under Armour appears to be progressing positively, a revenue inflection point and renewed confidence in sustained growth may still be a few quarters away.
The stock experienced a 27% increase the day before the price target revision, which the analyst suggested might have been premature given the current state of the company's transformation.
The new price target is based on applying a price-to-earnings (P/E) multiple of approximately 25 times, increased from around 20 times, to the fiscal year 2026 EPS estimate of $0.40. This reflects the potential for Under Armour's turnaround, as indicated by the analyst from Telsey Advisory Group.
In other recent news, Under Armour has been the subject of various developments. The company's second-quarter earnings per share (EPS) exceeded consensus expectations, leading Citi to maintain a neutral rating but raise the price target for Under Armour's stock.
Despite a 13% decline in North American sales, Citi acknowledged the company's cost management and brand repositioning efforts, albeit noting that a brand turnaround isn't expected until the latter half of 2025.
Under Armour reported mixed Q2 results with an 11% decline in revenue to $1.4 billion, and a decrease in e-commerce sales. However, it reported an adjusted operating income beat of $50 million, indicating a shift towards premiumization and enhancing direct-to-consumer channels. The company is set to open a new flagship store at its Baltimore headquarters and has plans to significantly increase its marketing investment.
Furthermore, Under Armour is managing a wholesale reset and optimizing logistics, with restructuring charges expected to total between $140 million to $160 million by fiscal 2026. The company maintains a low double-digit revenue decline outlook for fiscal 2025, but has raised its gross margin improvement forecast to 125-150 basis points. Lastly, an investor meeting is scheduled for December 2023 to discuss marketplace strategies.
InvestingPro Insights
Under Armour's recent stock performance aligns with the analyst's optimistic outlook. According to InvestingPro data, the company has shown significant returns over various timeframes, with a 30.63% return in the past week, 31.1% over the last month, and an impressive 67.62% over the past six months. This upward trajectory supports the analyst's decision to raise the price target.
InvestingPro Tips highlight that Under Armour operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide financial flexibility as the company implements its strategic initiatives. However, it's worth noting that the stock's RSI suggests it may be in overbought territory, aligning with the analyst's caution about the recent stock surge being potentially premature.
The company's P/E ratio (adjusted) for the last twelve months as of Q2 2025 stands at 18.17, which is lower than the new multiple of 25 times applied by the analyst for the fiscal year 2026 EPS estimate. This difference suggests room for potential valuation expansion if Under Armour successfully executes its turnaround strategy.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Under Armour, providing deeper insights into the company's financial health and market position.
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