Is Under Armour Going Under the Knife?
Under Armour faces downgrades
Under Armour’s (UAA) disappointing 4Q16 results prompted analyst downgrades from Wells Fargo, Susquehanna, BofA Merrill Lynch, Canaccord Genuity, B. Riley, Piper Jaffray, Evercore ISI, and Credit Suisse, among others.
Specifically, Susquehanna downgraded Under Armour from “positive” to “neutral.” Analyst Sam Poser stated: “Disappointing results, extremely weak guidance, elevated inventory, and resignation of the CFO drive the downgrade. Inventory remains elevated. Management may be doing what’s right for the brand over the long term, but 2017 sales and EBIT outlook are too low for us to continue to recommend the stock.”
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Canaccord Genuity downgraded UAA commenting “Following surprisingly weak Q4 results and further reduction in 2017 guidance, we are downgrading Under Armour stock to ‘hold’ from ‘buy.'”
The analyst added the following: “The disappointing results were largely driven by weak NA apparel business, which continues to be plagued by sporting goods bankruptcies, limited lifestyle [and] fashion merchandise in Under Armour’s assortment, and heavy promotional activity by Nike and Adidas to which Under Armour responded late.”
Wall Street’s recommendations on UAA
UAA is covered by 34 Wall Street analysts who have jointly rated the company a 2.7 on a scale of 1 as a “strong buy” to 5 as a “strong sell.” By comparison, peers Lululemon Athletica (LULU), Columbia Sportswear (COLM), and Nike (NKE) have received ratings of 2.4, 2.1, and 2.2, respectively, from Wall Street analysts.
Of the 34 analysts covering UAA, 11% have a “sell” recommendation on the company, while 29% analysts suggest a “buy,” and 60% recommend a “hold.” By comparison, 63% analysts have suggested buying Nike, while 55% have recommended buying COLM.
ETF investors seeking exposure to UAA can consider the SPDR Consumer Discretionary Select Sector ETF (XLY), which invests 0.30% of its portfolio in the company.