Under Armour Stock Down 20% Over Last Month, What’s Next?
[Note: UA recently changed its fiscal year-end to March 31 from December 31]
Under Armour (NYSE: UA), a sports equipment company that manufactures footwear, sports, and casual apparel, has declined by 21% over the last twenty-one trading days (one month) and currently stands at around $8. The company’s stock traded lower as the company’s growth slowed down due to supply chain challenges, rising costs, and Covid-19 disruptions in China. Under Armour was unable to obtain the inventory needed to satisfy consumer demand in the March-ending quarter, due to supply chain disruptions. The company’s profitability was further impacted by higher shipping costs, and it reported an unexpected loss in the quarter. To add to this, the company’s CEO Patrick Frisk stepped down from his role on June 1, making it the worst time to be without a CEO. The retailer appointed COO Colin Browne to take on interim CEO until a permanent replacement was found.
In the transition quarter ended March, UA’s revenues grew 3% year-over-year (y-o-y) to $1.3 billion, but its gross margin declined by 3.5 percentage points to 46.5%, and selling, general, and administrative expenses rose by 16% y-o-y. All told, the retailer generated a net loss of $60 million, and after adjusting for restructuring charges and other items – the company posted a loss per share of $0.01. This compared to market estimates of $0.06 adjusted earnings per share.
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Under Armour virtually skipped FY’22 with its March-end transition quarter in a separate period and went straight into fiscal 2023 while realigning its fiscal year to start in April instead of January. The company expects revenue to grow between 5% and 7% in fiscal 2023, gross margins to be compressed by inflation and foreign exchange headwinds, and adjusted EPS to rise between flat and 7%.
Now, is UA stock poised to decline in the short term or are gains looking more likely? Based on our machine learning analysis of trends in the stock price over the last six years, there is a 55% chance of a rise in UA stock over the next month (twenty-one trading days). See our analysis on UA’s Stock Chance Of Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of rising’ using last ten years’ data
[1] Returns of -3.3% or lower over a five-day period on 479 occasions out of 1576 (30%); Stock rose in the next five days in 254 of these 479 instances (53%)
[2] Returns of -8.4% or lower over a ten-day period on 274 occasions out of 1575 (17%); Stock rose in the next ten days in 134 of these 274 instances (49%)
[3] Returns of -21% or lower over a twenty-one-day period on 138 occasions out of 1576 (9%); Stock rose in the next twenty-one days in 76 of these 138 instances (55%)
We forecast Under Armour’s Revenues to be $6.1 billion for the fiscal year 2023, up 6% y-o-y. Looking at the bottom line, we now forecast earnings per share (EPS) to come in at 65 cents. Given the changes to our revenues and EPS forecast, we have revised Under Armour’s Valuation to $11 per share, based on a $0.65 expected EPS and a 16.8x P/E multiple for the fiscal year 2023. That said, the company’s stock appears very cheap at the current levels, with a 44% premium from the current market price.
It is helpful to see how its peers stack up. UA Peers shows how Under Armour stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
| Returns | Jul 2022 MTD [1] |
2022 YTD [1] |
2017-22 Total [2] |
| UA Return | 1% | -58% | -70% |
| S&P 500 Return | 1% | -20% | 71% |
| Trefis Multi-Strategy Portfolio | 3% | -21% | 211% |
[1] Month-to-date and year-to-date as of 7/13/2022
[2] Cumulative total returns since the end of 2016
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