Morgan Stanley: Steph Curry Can Save Under Armour

Wall Street analysts were cautious at best regarding Under Armour Inc UA's 2016 forecast this week

Morgan Stanley, Piper Jaffray, Brean and Deutsche Bank all lower price targets

Warm winter weather slows outerwear sales, excessive discounting and potential Sports Authority bankruptcy could slow growth

Under Armour expected to report earnings Jan. 28 before market open

Deutsche Bank

Deutsche Bank were bullish on Under Armour's prospects, offering the highest price target of the analysts in this roundup at $95. Analysts Dave Weiner and Sindhu Chitturi maintained a "buy" rating ahead of Thursday's earnings report. However, Weiner and Chitturi noted that uncertainty stemmed from slow outerwear sales through the warmer winter months and the company's chief financial officer transition as former PetSmart, Inc.PETM CFO Chip Molloy moves into the Under Armour role.

The analysts expects management to reiterate its projected CAGRs of 25 percent for revenue and 23 percent for operating income. Weiner and Chitturi offered 2015 estimated EPS of $1.04 and 2016 estimated EPS of $1.35.

Brean

Brean analysts shared Deutsche Bank's concerns about slack in outerwear sales, but expects satisfactory fall 2016 sales of Under Armour's new light jacket line. Brean trimmed its price target to $84 and offered an EPS estimate for 2015 of $1.04.

Piper Jaffray

Analysts Erinn Murphy and Christof Fischer were bearish on Under Armour and showed concern for the fallout over a potential Sports Authority bankruptcy. The athletics retailer accounts for an estimated 4% of Under Armour's sales and last week missed a $343 million interest payment on its 2018 debt.

Jaffray's offered a more pessimistic analysis than Wall Street, noting that the Street estimated $1.12 billion in sales as opposed to Jaffray's $1.09 billion estimate.

Murphy and Fischer lowered their price target from $88 to $64 and offered an estimated $1.28 EPS for 2016.

Morgan Stanley

On Jan. 10, Morgan Stanley analysts Jay Sole, Joseph Wyatt and Edward Ryan offered a grim view of Under Armour's 2016. They downgraded the stock to "underweight" and cut their target price nearly in half from $103 to $62.

Under Armour's footwear is discounted five times the industry average, Sole, Wyatt and Ryan noted, which might hamper growth in the coming year. Under Armour's running shoe prices are down 20 percent from January 2013, while industry running shoe prices have only dropped 4 percent in that time.

"Our view, and the market's, is that Under Armour is a great brand and will eventually become the world's number two athletic wear company and possibly number one," wrote the analysts. However, they see potentially softening women's apparel sales and long-term limits on footwear growth as the two obstacles the company must overcome to get there.

Morgan Stanley reiterated that Under Armour was offering too good a deal on their shoes, and recommended that Under Armour price its Steph Curry shoes more in line with Nike's premium basketball shoes. Curry is as popular as players with Nike's exclusive deals like LeBron James, and even sells more jerseys than James, yet his Under Armour shoes are priced around $50-100 less than Nike's. Sole, Wyatt and Ryan see this as a big opportunity for Under Armour to expand revenue in its existing product line.

Under Armour shares were up 1.78 percent at the end of trading Wednesday.