According to Merrill Lynch, Under Armour’s recent Investor Day reiterated its powerful top-line outlook, with revenue now expected to reach $7.5 billion by 2018 from $3.1 billion in 2014, and compared to the firm’s prior forecast of $6.8 billion. The 25% revenue compound average growth rate (CAGR) will be fueled by roughly 50% international growth and 40% growth in footwear. EPS are expected to grow slightly below sales, as Under Armour makes investments in new categories/geographies, innovation, infrastructure, personnel and connected fitness to drive long-term growth. Merrill Lynch lowered its 2016 EPS estimate to $1.35 from $1.40, and its 2017 EPS estimate to $1.70 from $1.80, given the higher spending outlook. The firm has a price objective of $108.
Also Credit Suisse was particularly impressed with the company’s use of its basketball business and particularly the relationship with Stephen Curry as a lever to become more relevant in footwear and international markets. The firm views this as crucial for a business trying to sustain 20%-plus top-line growth for another three years to reach its revenue target, suggesting 25% revenue and EPS CAGRs from 2014 levels.
Ahead of Under Armour earnings a few analysts weighed in on the company:
- B. Riley reiterated a Neutral rating with a $100 price target.
- Piper Jaffray reiterated a Neutral rating with a $113 price target.
- Brean Capital initiated coverage with a Buy rating and a $117 price target.
- Morgan Stanley reiterated a Hold rating.
- Canaccord Genuity reiterated a Buy rating and raised its price target to $130 from $105.
So far in 2015, Under Armour has outperformed the market, with the stock up over 47% year to date. Over the course of the past 52 weeks, the stock is up 53.5%.
Shares of Under Armour were trading at $99.40 Wednesday, with a consensus analyst price target of $108.04 and a 52-week trading range of $61.82 to $105.89.
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