Goldman Sachs upgraded Under Armour
On January 22, Goldman Sachs upgraded Under Armour (UAA) to “buy.” The stock didn’t move much and fell marginally. Under Armour stock has risen 15.9% YTD (year-to-date). In 2018, the stock rose 22.5%.
As of January 22, among the 33 analysts covering Under Armour stock, ~21% recommended a “buy,” 52% recommended a “hold,” and ~27% recommended a “sell.”
So far, there have been two price revisions in January. On January 7, UBS lowered its target price to $20.00 from $24.00. On January 2, Wells Fargo reduced its target price to $20.00 from $23.00. Analysts’ mean target price for Under Armour stock is $21.04, which reflects a 2.7% upside based on its stock price on January 22.
On January 22, Under Armour’s 12-month forward PE ratio was 62.2x. In comparison, Nike (NKE), Columbia Sportswear (COLM), Skechers (SKX), and Gap (GPS) have PE ratios of ~27.3x, 21.1x, 12.9x, and 9.4x, respectively.
What’s in store for Under Armour in 2019?
Under Armour’s North America segment has been in trouble for some time. The North America division is the biggest contributor to Under Armour’s top line. In 2018, the North American market is estimated to see a low-single-digit decline in its revenues. For 2019, the North America revenues are forecast to remain the same on a year-over-year basis.
Under Armour is focusing on increasing full-price sales to improve its performance in the region along with extensive inventory management initiatives.
Under Armour’s revenue growth could find a cushion in direct-to-consumer and international operation growth amid the challenges in North America.
Under Armour’s projected five-year revenue CAGR (compound annual growth rate) for North America is 1%–3%. For international operations, the five-year revenue CAGR was estimated at 17%–19%.
By 2023, although North America would still be the largest revenue contributor, its share would fall to 56% from 73%.