Stock of the Day - May 23, 2022

Under Armour (UAA)

$7.44

+$0.19 (+2.6%)

Market Cap: $3.09B

About Under Armour

Under Armour, Inc., together with its subsidiaries, engages developing, marketing, and distributing performance apparel, footwear, and accessories for men, women, and youth. The company provides its apparel in compression, fitted, and loose fit types.

It also offers footwear products for running, training, basketball, cleated sports, recovery, and outdoor applications. In addition, the company provides accessories, which include gloves, bags, headwear, and socks; and engages in brand licensing, digital subscription, advertising, and other digital business activities. It primarily offers its products under the UNDER ARMOUR, ARMOUR, HEATGEAR, COLDGEAR, HOVR, UA, PROTECT THIS HOUSE, I WILL, ARMOUR FLEECE, and ARMOUR BRA brands. The company sells its products through wholesale channels, including national and regional sporting goods chains, independent and specialty retailers, department store chains, mono-branded Under Armour retail stores, institutional athletic departments, and leagues and teams, as well as independent distributors; and directly to consumers through Brand and Factory House stores, as well as through e-commerce websites. It operates in the United States, Canada, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America. The company was incorporated in 1996 and is headquartered in Baltimore, Maryland.

Today's Trend

Under Armour, Inc. (NYSE: UAA) is getting a mixed but mostly cautious read from the market. The stock has been under pressure as analysts continue to trim expectations and point to slower sales growth, but recent insider buying is giving investors some support and signaling possible confidence in the company’s long-term turnaround.

Major shareholder V Prem Et Al Watsa bought a large block of Under Armour shares in multiple SEC-disclosed transactions, including 739,521 shares at about $4.97 and 438,723 shares at $4.99. Heavy insider buying can be a bullish signal that a key shareholder sees value at current levels. Article Title
Truist Financial kept a Hold rating on Under Armour, and Telsey Advisory Group assigned a $5.50 price target with a Market Perform view, suggesting analysts see limited near-term upside but not a collapse. Article Title
Truist also set a new $5.00 price target, while BNP Paribas Exane cut its target to $5.00. These updates reinforce the view that Wall Street expects the stock to remain range-bound unless fundamentals improve. Article Title
Zacks Research downgraded Under Armour from Strong Buy to Hold, adding to the negative analyst sentiment after recent commentary pointed to slowing sales and tougher retail conditions. Article Title
Articles highlighting weaker growth trends and pressure from a shifting retail market are feeding concerns that Under Armour’s turnaround may take longer than investors want, which is weighing on the stock. Article Title

Bottom line: Under Armour’s stock appears to be moving on a tug-of-war between bullish insider buying and bearish analyst downgrades / slower-growth concerns. The recent insider purchases may be helping offset some of the negative sentiment, but Wall Street remains cautious on the company’s near-term outlook.

Under Armor Stock is Getting Undervalued

Written By Jea Yu on 5/23/2022

Athleisure apparel and footwear maker Under Armour (NYSE: UAA) stock has been falling within the proximity of revisiting its pandemic lows. The Company concluded its 2020 restructuring plan with the recognition of $57 million during its transition quarter ending March 31, 2022. COVID lockdowns in China impacted demand dynamics leading to cutting full-year estimates. Headwinds including supply chain disruption and rising logistics costs caused gross margins to sink (-350 bps) to 46.5%. Inflationary pressures, COVID effects, and ongoing supply chain problems led the Company to low ball estimates moving forward as visibility remains questionable. The Company recently announced on May 18, 2022, that CEO Patrick Fisk would step down as CEO and board members effective June 1, 2022, and will remain an advisor through September 1, 2022, as the Company undergoes a CEO search. The Company plans to launch its loyalty program by the end of the year. Prudent investors seeking exposure at a discount ahead of a new CEO can look for opportunistic pullback levels to scale into position.

Fiscal Q1 2022 Earnings Release

On May 6, 2022, Under Armour released its fiscal first-quarter 2022 results for the quarter ended March 2021. The Company reported a diluted earnings-per-share (EPS) profit of $0.01, missing consensus analyst estimates of $0.12 by (-$0.11). Revenues grew 3.4% year-over-year (YOY) to $1.30 billion, missing analyst estimates of $1.34 billion. Gross margin decreased (-350 bps) to 46.5% driven by rising freight expenses. The Company authorized a stock buyback program of up to $500 million over the next two years through an open market, privately negotiated, and accelerated repurchase transactions. Under Armor CEO Patrick Frisk commented, "Having successfully executed a multi-year transformation and after delivering a record year in 2021 – we are continuing to serve the needs of athletes amid an increasingly more uncertain marketplace. As global supply challenges and emergent COVID-19 impacts in China eventually normalize, we are confident that the strength of the Under Armour brand coupled with our powerful growth strategy positions us well to deliver sustainable, profitable returns to shareholders over the long-term."

Fiscal 2023 Full-Year Outlook

The Company provided a fiscal full-year 2023 outlook for revenues to grow 5% to 7% versus a comparable baseline period of $5.7 billion including 3% headwinds related to the strategic decision to work with vendors and customers to cancel orders affected by capacity issues, supply chain delays, and emergent COVID-19 impacts in China. Gross margins are expected to be down (-150 bps) to (-200 bps) to 49.6%. Operating income is expected to reach $375 million to $400 million versus comparable baseline adjusted operating income of $24 million. Diluted EPS is expected between $0.79 to $0.84, including a $0.28 tax benefit.

Conference Call Takeaways

CEO Frisk reminisced about the turnaround transformation for the Company during his tenure and his confidence in Under Armor’s long-term growth potential. The growth will be driven by direct-to-consumer (DTC), women’s footwear, and international businesses anchored in five platforms to accelerate scale and growth for the brand. The five platforms are consumer-centricity, product engine, go-to-market platform, end-to-end planning, and omnichannel excellence. Under Armor plans to launch a loyalty program in North America by end of 2022 to engage its customers with content, events, rewards, and community-based interactions. He went on to talk about some of its high-profile sponsorships including basketball players Stephan Curry, and Joel Embiid having some of their best seasons. Major League Baseball star Bryce Harper continues to gain momentum from his 2021 national MVP and World Series Performance. Jordan Spieth of the PGA extended their partnership for four more years. He stated, “These are just a few examples of how we drive brand affinity, utilizing the best athletes on the planet, a halo that manifests itself through our run, train, and recover products. And in the second half of 2022, we have several exciting innovations coming.”

UAA Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precise view of the landscape for UAA stock. The weekly rifle chart formed an inverse pup breakdown after rejecting the $17.93 Fibonacci (fib) level as the stochastic crossed back down through the 20-band on a mini inverse pup. The weekly inverse pup breakdown has a falling 5-period moving average (MA) resistance at $12.48 and a 15-period MA resistance falling at $15.24. The weekly 200-period MA resistance sits at $18.71. The weekly lower Bollinger Bands (BBs) sit at $9.00. The monthly lower BBs sits at $9.86. The weekly market structure low (MSL) buy triggers a breakout up through the $10.75. The daily rifle chart formed an inverse pup breakdown with a falling 5-period MA at $10.35 followed by the 15-period MA resistance at $11.72 with daily lower BBs at $6.20. The daily stochastic crossed back down off the 20-band rejection. Prudent investors can watch for opportunistic pullback levels at the $9.53 fib, $8.82 fib, $8.17 fib. $7.69 fib, $7.15 fib, and the $5.87 fib level. Upside trajectories range from the $13.38 fib up towards the $17.66 fib level.

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