'Sell Under Armour': Susquehanna Sees The Entire Brand At Risk

Under Armour Inc UAA investors hoping to turn over another leaf in 2018 may be sorely disappointed. One Wall Street analyst says Under Armour will have another difficult year and the stock has even more downside ahead.

The Analyst

Susquehanna analyst Sam Poser downgraded Under Armour from Neutral to Negative and maintained the firm’s $11 price target for the stock.

The Thesis

According to Poser, optimism that Under Armour can regain its lost momentum by improving customer and investor sentiment is misguided. Susquehanna is maintaining its 218 EPS guidance for Under Armour, but Poser said in the downgrade note that the strength of Under Armour’s brand will likely continue to deteriorate this year, leading to an even lower stock multiple.

“Given the poor brand management, top-line revenue increases, which have slowed to +LSD, and an uncertain future, we see no reason why UAA deserves to trade near its historic multiple,” Poser said.

Susquehanna said Under Armour needs to protect its brand by pulling its merchandise from Kohl’s Corporation KSS, DSW Inc. DSW and Famous Footwear stores. He believes those retailers are undermining a significant portion of the Under Armour TV advertising spend of Dick’s Sporting Goods Inc DKS and Hibbet Sports, Inc. HIBB.

The weak North American athletic apparel market is hitting Under Armour much harder than rival Nike, Inc. NKE. In the most recent quarter, roughly 80 percent of Under Armour’s revenue came from North America. Poser said Susquehanna sees no positive inflection point for the North American market in the near-term.

Price Action

After selling off by nearly another 50 percent in the past year, Under Armour stock traded down by 4.8 percent to $15.22 Tuesday morning.

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