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Can Under Armour Deflect Its Latest Downgrade?

PART:
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Part 2
Can Under Armour Deflect Its Latest Downgrade? PART 2 OF 2

Under Armour on the Street: What the Analysts Recommend Now

Wall Street’s recommendations on UAA

As discussed we discussed in Part 1 of this series, Under Armour (UAA) was downgraded by FBR to an “underperform” from a “market perform” rating on April 3.

UAA is covered by 33 Wall Street analysts and has received a consensus rating of 2.8 on a scale of 1 (strong buy) to 5 (sell). It was rated 2.3 before releasing its 4Q16 results, which the company released at the end of January.

Under Armour on the Street: What the Analysts Recommend Now

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By comparison, peers Lululemon Athletica (LULU), Columbia Sportswear (COLM), and Nike (NKE) have received ratings of 2.5, 2.2, and 2.2, respectively.

More analysts now recommend a “sell” for UAA

Of the 33 analysts that rate UAA, 18% have recommended a “sell” for the stock. Prior to the company’s dismal fourth quarter results, only 3% of the analysts had suggested selling UAA. There was no “sell” recommendation on the stock until January 2016. The majority of the analysts—around 55%—recommend a “hold” for UAA, while 27% suggest a “buy.”

By comparison, 62% of analysts suggest buying Nike, while 70% recommend buying Foot Locker (FL).

Target prices

Wall Street has currently set an average target price of $22.52 for UAA stock, indicating an upside of about 15% over the next year. By comparison, Nike and Columbia Sportswear have upsides of 12% and 8%, respectively, while Lululemon has an upside of 22%.

Valuations

Under Armour is now trading at a one-year forward PE (price-to-earnings) ratio of 47x, as compared to its three-year average of 66x. While its valuations have fallen drastically, UAA continues to trade at a premium to most apparel peers.

Nike, LULU, and Columbia Sportswear are now trading at one-year forward PE ratios of 22.4x, 21.8x, and 20.8x, respectively (as of April 3, 2017).

Notably, ETF investors looking for indirect exposure to UAA can consider the iShares US Consumer Goods ETF (IYK), which invests 0.16% of its portfolio in Under Armour.

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