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Under Armour Beat Q3 Earnings Expectations, Shares Swell

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In pre-market hours on Friday, Oct. 30, Under Armour reported their Q3 earnings. In the end, the results wildly exceeded expectations. Experts proposed a $0.04 EPS, but the actual EPS reached $0.26—550 percent higher than presumed. 

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Under Armour touts footwear sales as driving force

With their quarterly revenue reaching $1.43 billion, Under Armour beat expectations by more than 22 percent. Despite the pandemic, they've managed to keep their revenue exactly the same as Q3 2019. 

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This Baltimore-based company says footwear sales have helped them maintain their momentum, all things considered. Their line of shoes raked in $299 million in revenue, an increase of 19 percent. Globally, their overall sales increased by 18 percent, hitting $433 million.

In an effort to secure their place with socially distanced consumers, Under Armour has invested enough in their e-commerce platform to account for a 50 percent online growth globally.

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Despite quarterly pleasantries, Under Armour still expects to see their revenue drop for 2020, though by less than previously expected.

Under Armour selling MyFitnessPal to private equity firm for a net loss

On the same day the company released their third-quarter earnings, Under Armour shared news that it's selling its app MyFitnessPal. They're completing the deal with a private-equity firm called Francisco Partners, and it could reach a valuation of $345 million. 

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MyFitnessPal is a workout platform and mobile app with more than 180 million users. Under Armour acquired the platform in 2015 for $475 million. Under Armour president and CEO Patrik Frisk said in a press release, "As part of our ongoing transformation, we are committed to actively managing our business to ensure that our strategies and assets are prioritized to connect even more deeply with our target consumer – the Focused Performer."

Despite MyFitnessPal's marked user growth in the past five years, Under Armour is selling the platform at a heavily discounted rate (and that's not even accounting for inflation). Perhaps there's more to the story than simply honing in on the target audience.

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UAA stock price

Under Armour stock experienced some marked fluctuations at the start of 2020 before dropping drastically as COVID-19 made its way to the U.S. 

At market open after reporting their Q3 earnings, UAA had already boosted 10.67 percent. By 9:30 a.m., they were trading at $15.25 per share. This is about midway between their 52-week high and low. UAA stock has dipped 32.37 percent YTD.

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A forecast for UAA stock

Under Armour has managed to incite sales fairly well during the pandemic, but their discounted MyFitnessPal sale, plus their year-long revenue drop, means the company will need to do some scrambling in the future. They're playing in an uncertain arena, and market moves like the ones they're taking could go either way.

In the next 12 months, experts expect UAA stock to fall a bit lower with a median projection of $11.00 per share. I think they'll make up more of what they lost, but I'm uncertain whether they'll get back to where they were when they initially purchased MyFitnessPal in a reasonable time.

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