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Does Under Armour Deserve A Second Look?

Does Under Armour Deserve A Second Look?
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Is the worst over for Under Armour Inc (NASDAQ: UAA)?

After seeing shares drop 29 percent post-earnings, expectations may now be so low that the company can now hit the reset button.

The downside is now limited on Under Armour, but the company must protect their house better, Susquehanna analyst Sam Poser said in a Tuesday note.

“The street is already bracing for poor results for the foreseeable future. Further, we believe UAA is becoming more cognizant of its recent mistakes,” Poser said. (See Poser's track record here.) 

Susquehanna upgraded Under Armour from Negative to Neutral and raised its price target from $11 to $15.

A Pivot To Affordable Luxury?

Under Armour is committed to returning to the pull model, with more demand and less inventory in the market, but Poser said he's not convinced that the retailer's distribution model will allow it to grow as an affordable luxury brand, given its current presence in discount retailers.

“We believe that distribution to retailers such as Kohl’s, DSW and Famous Footwear must cease quickly in order to rebuild an affordable luxury brand with a pull model. Unfortunately, UAA appears focused on short-term growth over taking the painful but appropriate steps to make Under Armour a strong brand for the long-term,” Poser said. 

Despite the upgrade, the Susquehanna analyst said Under Armour is in trouble in North America, and that the company must do an extraordinary amount of work to restore brand sentiment.

Creating a compelling lifestyle business, albeit challenging in the current environment, will be an important factor in turning things around for Under Armour, Poser said. 

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Photo courtesy of Under Armour. 

Latest Ratings for UAA

Sep 2018JP MorganUpgradesUnderweightNeutral
Aug 2018BuckinghamMaintainsNeutralNeutral
Aug 2018Morgan StanleyInitiates Coverage OnEqual-Weight

View More Analyst Ratings for UAA
View the Latest Analyst Ratings

Posted-In: Sam Poser Susquehanna under armourNews Upgrades Price Target Analyst Ratings Best of Benzinga


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