Morgan Stanley Downgrades Under Armour, Cites Declining Share In Women's Market

• Shares of Under Armour Inc UA have declined 26.72 percent over the past three months, down to a low of $75 on January 8.
• Morgan Stanley’s Jay Sole has downgraded the rating on the company from Equal-weight to Underweight, while lowering the price target from $103 to $62.
• Sole mentioned that data points towards declining share of the women’s apparel segment and falling footwear ASPs, adding that there could be 21 percent downside to the stock valuation.

Analyst Jay Sole explained that the recent Sport Scan data suggested that Under Armour was losing share of the apparel market, for the first time in three years, “and, more surprisingly, ASPs are falling at an accelerating pace.”

Both trends were more apparent in women’s apparel, despite the significant marketing investment in this segment in 2015.

Although warm weather might explain some of the decline, Sole believes that the company might be “reaching maturity in US apparel faster than previously thought.”

However, Sole remained constructive on the company’s international opportunity, while stating that the stock does not appear to price in a slowdown in the U.S.

On the other hand, Under Armour’s running footwear prices have dropped 20 percent since January 2013, as compared to the industry decline of only 4 percent.

“This change in trend is a major concern because this positioning threatens to erode UA’s premium brand image and ultimately its long-term growth potential,” according to the Morgan Stanley report.