On Tuesday, Morgan Stanley took a bearish stance on Under Armour (NYSE:UA), Inc. (NYSE:UAA), downgrading the stock from Equalweight to Underweight. The firm has also set a new price target of $4.00 for the company's shares, signaling a potential downside of approximately 40%.
The downgrade is primarily based on several negative factors identified by Morgan Stanley. The firm's proprietary research, which includes a 2024 global sportswear survey and channel checks, has revealed concerning indicators for Under Armour. Additionally, there is an anticipated risk of negative earnings per share (EPS) revisions in the near term (NTM).
The analyst from Morgan Stanley also pointed out that the current valuation of Under Armour's stock carries de-rating risk. This is attributed to the company's limited prospects for growth and profitability improvement in the near term. The analyst believes that the stock's valuation is expensive given these constraints.
Under Armour has been facing challenges in a highly competitive sportswear market. The brand has been working on strategies to improve its performance, but the latest insights from Morgan Stanley suggest that investors could see a decline in the stock's value.
Investors and market watchers will be keeping a close eye on Under Armour's upcoming financial reports and market performance to see how the company responds to these challenges. The new price target reflects a significant shift in expectations from one of the leading financial institutions in the industry.
In other recent news, Skechers USA (NYSE:SKX) Inc. was upgraded from Equalweight to Overweight by Morgan Stanley, setting a new price target at $80.00. The upgrade was based on positive results from proprietary research, including a 2024 global sportswear survey, and channel checks. Morgan Stanley expressed confidence in the potential for positive earnings per share revisions over the next twelve months.
In contrast, Under Armour Inc (NYSE:UAA). has been facing challenges. The company recently agreed to a $434 million settlement for a shareholder class action lawsuit from 2017. To fund the settlement, Under Armour plans to use its available cash and $1.1 billion revolving credit facility. Despite the setback, the company is pushing forward with a restructuring plan aimed at repositioning the brand within the U.S. market.
Simultaneously, Under Armour's price target was reduced to $6.00 from the previous $8.00 by Williams Trading, maintaining a Hold rating on the stock. This adjustment followed the company's fourth-quarter earnings beat for the fiscal year 2024 but comes in the wake of fiscal year 2025 guidance that fell significantly short of market expectations.
These are recent developments for both Skechers and Under Armour as they navigate the competitive sportswear market.
InvestingPro Insights
In light of Morgan Stanley's bearish outlook on Under Armour, Inc. (NYSE:UAA), our InvestingPro Insights offer a nuanced perspective on the company's financial health and market performance. According to real-time data from InvestingPro, Under Armour's market capitalization stands at $2.89 billion, with a P/E ratio of 12.47, reflecting a market assessment of its earnings potential. Notably, the company's P/E ratio has shown stability, with an adjusted figure of 12.38 for the last twelve months as of Q4 2024.
InvestingPro Tips suggest that despite stock price volatility, Under Armour possesses liquid assets that exceed its short-term obligations and operates with a moderate level of debt. These factors may provide some financial flexibility in navigating the competitive sportswear market. Additionally, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
While Under Armour does not pay a dividend, which might be a consideration for income-focused investors, the company's fundamentals present a mixed picture. It's worth noting that the InvestingPro platform offers additional insights, with a total of 6 InvestingPro Tips available for Under Armour, which could further inform investment decisions. For those interested in a deeper dive, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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