Under Armour Inc. (NYSE: UAA) stock was crushed on Monday, despite receiving a relatively positive analyst upgrade. On Friday, the firm reported results, and while they were better than expected, there was still a sharp drop off in revenues as a result of the COVID-19 pandemic.
Susquehanna’s Sam Poser upgraded Under Armour to Neutral from Negative and more than doubled the price target to $9 from $4. The main reason for this upgrade that Poser says is that there is “less potential for extreme downside for the stock.”
In the Susquehanna report, Poser notes that the earnings report saw revenues drop by over 40% year over year, which very well could be the bottom. Also with digital sales ramping up, the outlook is getting better.
Poser is looking for a “potential reset in 2021 and limit near-term downside risk.” It is worth pointing out that he is not necessarily bullish on the stock. Poser continues, “However, just because Under Armour will be well positioned for 2021 does not mean it will take the necessary steps to improve.”
Again, Poser commented that he continues to be concerned about the general strategy of the company, which has been a problem in the past. He concluded saying, “Most notably, if, as management states, Under Armour’s target consumer is the focused performer, and if premium has been, and will continue to be, core to Under Armour’s brand positioning, then why does Under Armour have a growing business at Kohl’s and floundering business at Dick’s Sporting Goods, Hibbett Sports, and Foot Locker? While a bottom appears at hand, Under Armour has much work to do.”
Under Armour stock traded down over 7% to $9.74 on Monday, in a 52-week range of $7.15 to $21.96. The consensus price target is $9.69.
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