On Friday, Morgan Stanley (NYSE:MS) reiterated its Underweight rating on Under Armour (NYSE:UA), Inc. (NYSE:UAA), maintaining a price target of $4.00, significantly below the current trading price of $9.59. The firm's stance remains unchanged following Under Armour's first investor day under new management. The analyst acknowledged the clarity and focus of the company's forward plan and the credibility of its new leadership.
However, skepticism about the timeline for a turnaround is reflected in the stock's high single-digit percentage drop today. According to InvestingPro data, analyst targets for UAA range from $4 to $16, with 11 analysts recently revising earnings estimates upward for the upcoming period.
Under Armour aims to revitalize its brand and operations, but Morgan Stanley believes the company still has much to prove. The persistence of the original concerns supporting the Underweight rating includes the early stages of the turnaround effort, the uncertainty of its success, risks to future earnings per share, the potential for valuation downgrades, and the challenges of competing in a tough sportswear market.
InvestingPro analysis shows the company maintains a healthy liquidity position with a current ratio of 2.18 and operates with moderate debt levels, though it wasn't profitable in the last twelve months.
The investor day provided an opportunity for Under Armour to present its strategy under the new leadership team. While the management's strategy was seen as clear and focused, Morgan Stanley noted that the foundational elements of their Underweight thesis remain unaltered. The firm emphasized the stock's status as a "show me story," indicating that investors may be looking for more tangible progress before gaining confidence in the brand's recovery.
The analyst from Morgan Stanley plans to continue monitoring Under Armour's progress, particularly new product launches, shifts in customer demographics, and changes in market sentiment. These factors will be assessed through channel checks in wholesale sportswear and specialty running sectors to gauge early signs of the company's strategic traction.
Despite the additional insights provided by the management, the firm's position on Under Armour's stock remains steadfast.
In other recent news, Under Armour Inc (NYSE:UAA). has been the focus of various significant developments. The sportswear company reported a decrease in Q2 revenue by 11% to $1.4 billion and a drop in e-commerce sales. Despite this, the company exceeded expectations in terms of operating income and earnings per share. The company is shifting its focus towards a more premium market position and enhancing its direct-to-consumer channels.
Analysts from various firms including BMO Capital, William Blair, Baird, Citi, Needham, and Telsey Advisory Group have maintained neutral ratings, with varying price targets. BMO Capital maintained an Outperform rating and a $12.00 price target, while Baird reiterated a Neutral rating with a steady price target of $10.00. Needham initiated coverage on Under Armour with a Hold rating, citing the need for evidence of sustainable growth before altering their position.
These ratings and target adjustments followed Under Armour's recent financial performance and a recent meeting with the company's management, which detailed strategies for brand enhancement and operational efficiencies.
The company also reaffirmed its fiscal 2025 full-year outlook and outlined strategic initiatives to strengthen its brand and enhance shareholder value. The majority voting control held by CEO Kevin Plank is also a point of consideration for investors.
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