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Why Piper Jaffray Is Raising Under Armour's PT To $90

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In a report published Friday, Piper Jaffray analysts maintained an Overweight rating on Under Armour, Inc (NYSE: UA), while raising the price target from $84 to $90, saying that the company's footwear innovation pipeline "remains strong."

"Following travels with Finish Line (NASDAQ: FINL) management, we are highlighting UA as a positive derivative based on how this key partner views the brand's future product innovation," the analysts said.

Although Nike, Inc (NYSE: NKE) accounts for 70 percent of the sales, Finish Line's management was optimistic about UA's current momentum in footwear, both in basketball and running. While UA accounts for about 5-7 percent of Finish Line's sales, this could get closer to 10 percent in time in case the momentum continues.

In the report Piper Jaffray noted, "Recall in the most recent 2 qrtrs, UA saw consolidated footwear growth in excess of 50%. The Steph Curry shoe remains in high demand and FINL mgmt believes there is more innovation coming down the pipeline to enhance this platform… see a proliferation of unit growth of the Curry platform and believe the brand can command higher prices."

While NIKE has five dominant running platforms, namely Lunar, AirMax, Shox, Free and Roshe, Under Armour has three emerging platforms, namely Spine, Scorpio and Speedform.

"These platforms are starting to perform better and according to Finish Line, are the best assortments they've carried. Furthermore, visibility in running remains strong for back-to-school...As UA improves its footwear expertise, it forces further innovation with NKE which in turn lifts the broader athletic market," the analysts wrote.

The EPS estimates for FY15 and FY16 have been raised from $1.06 to $1.09 and from $1.40 to $1.50, respectively. "…we believe improving traction in footwear and better product pipeline could yield upside," the report said, while adding that UA footwear could expand from $430M to $1B of sales in the next few years.

Latest Ratings for UA

DateFirmActionFromTo
Jan 2017CLSAInitiates Coverage OnBuy
Nov 2016Stifel NicolausMaintainsHold
Oct 2016MizuhoDowngradesBuyNeutral

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Posted-In: Analyst Color Price Target Reiteration Analyst Ratings

 

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