Under Armour Inc. saw its price target slashed at at least nine research groups following transition period results that show current and future margin pressure. Under Armour, which is shifting its fiscal calendar, recently reported a net loss for the transition quarter versus a profit the year prior. “Having successfully executed a multiyear transformation after delivering the best year in Under Armour’s history in 2021, results for our transition period came in lighter than we had expected due to ongoing supply challenges and emergent COVID-19 impacts on our Asia-Pacific business,” said Chief Executive Patrik Frisk on the earnings call, according to FactSet. “These trends, which we believe to be temporary, are also expected to impact how fiscal 2023 is shaping up.” Wedbush analysts rate Under Armour stock outperform and cut the price target to $20 from $33. “Tough margin quarter, guidance implies more pressure ahead,” analysts said. “Somewhat surprisingly, they expect Q2 to be the worst gross margin quarter of the year (later than most other companies), and they don’t get back to gross margin expansion until Q4.” Baird analysts maintained their outperform stock rating, but “meaningfully” cut Under Armour’s price target to $15 from $28. “Management expressed confidence in underlying fundamentals (dampened by supply/China), yet in our view could better address questions about brand health following a multi-year turnaround/re-investment period,” Baird’s note said. Truist Securities also raises questions about the health of the brand. “While we are hopeful that manufacturing capacity constraints, supply chain delays, freight expense, etc. will improve in the back half, we believe the central question on Under Armour is whether or not its challenges are in fact supply-related,” analysts said. “From our perspective, we simply aren’t yet convinced that underlying demand for the Under Armour brand is greater than it was pre-pandemic given the lack of proof points in a normalized environment.” Truist rates Under Armour stock hold and cut its price target to $15 from $20. Other price target changes include Wells Fargo (price target cut to $20 from $28, stock rated overweight); Cowen (price target cut to $17 from $27, stock rated outperform); and BMO Capital Markets (price target lowered to $19 from $25, stock rated outperform). Under Armour shares have plunged more than 50% for the year to date.
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