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Could Under Armour Have Its Fundamentals On Track In Less Than A Year?

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Could Under Armour Have Its Fundamentals On Track In Less Than A Year?
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Despite Under Armour Inc (NYSE: UAA)'s catastrophic year, one analyst is maintaining a bullish stance on the company, projecting that long-term investors will be rewarded if they stay the course ahead of a sentiment shift that could come in less than a year. 

The Analyst

Jonathan Komp of Baird Equity Research maintained an Outperform rating with a $17 price target.

The Thesis

Although Komp said he believes that the current negative sentiment surrounding Under Armour is warranted, but thinks Wall Street may be overlooking the company’s potential for a comeback as it embarks on a two-year turnaround plan. (See Komp's track record here.) 

“We still believe UA's near-term slowdown reflects temporary disruptions and not deterioration of brand fundamentals. While disappointed a potential recovery has been pushed out, we do not believe the brand fundamentally is broken,” Komp said.

With the fourth quarter shaping up no worse than planned, Komp said that staying involved ahead of a potential turnaround will reward longer-term investors. At the same time, Under Armour is the weakest name on Baird's conviction list, Komp said. 

“Near-term visibility still is clouded, but FQ4 seems on track and better operating fundamentals may be [less than] 12 months away, suggesting long-term oriented investors should consider UAA." 

One of Under Armour’s biggest issues is having a $6-6.5 billion infrastructure with less than $5 billion in sales, Komp said. 

The addition of COO Patrik Frisk can quickly impact the business, said Komp, who likened Frisk's arrival to Nike Inc (NYSE: NKE)'s late 1990s restructuring.

A former CEO of the Aldo Group, Frisk is thought to be the catalyst who can make Under Armour a player in sportswear fashion, a category the company has been desperately trying to break into, but in which it's failed to move the needle. 

Frisk will have the tall task of changing the sentiment surrounding Under Armour’s product lineup, particularly in footwear, a segment where social media bashing of Under Armour's releases has become as American as apple pie.

 
 

Sportswear analyst Matt Powell said Under Armour's problems are straightforward, telling Benzinga: “Under Armour's problems are really simplistic. They are not playing where it's hot." The retailer hasn't established a foothold in the retro or running categories, Powell said. 

Retro they can’t play in, and they have not been able to establish runner, that’s really hurt Under Armour,”

It's possible for Under Armour to make a comeback over the long term, the analyst said. 

Price Action

Shares of Under Armour were falling 2.58 percent to $13 at the time of publication. 

Related Links: 

Your End-Of-Year Guide To Apparel, Footwear, Fitness Stocks

A Post-Sneaker World: How 'Small' Footwear Brands Are Beating The Giants

Photo courtesy of Under Armour.

Latest Ratings for UAA

DateFirmActionFromTo
Nov 2017SusquehannaUpgradesNegativeNeutral
Nov 2017UBSMaintainsNeutral
Nov 2017JP MorganMaintainsUnderweight

View More Analyst Ratings for UAA
View the Latest Analyst Ratings

Posted-In: Baird Equity Research Jonathan Komp Matt PowellNews Price Target Reiteration Analyst Ratings Best of Benzinga

 

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