It’s been a tough year for apparel retailers, but the pain has spared some athletic companies. That can’t be said of
but an analyst says the beaten-down shares deserve another look.
Under Armour (ticker: UAA) shares are down more than 50% in 2020, as the company was struggling before the pandemic forced store closures across the U.S. While problems remain, Raymond James analyst Matthew McClintock says the selloff has gone too far. He reiterated a Strong Buy rating and a $12 price target, nearly 20% above where shares stand today.
“While we acknowledge there is ‘hair’ on the Under Armour story, we believe shares offer a favorable risk/reward profile at current levels, and there’s ‘significant upside potential with any good news (or more simply ‘less bad’ news)’,” McClintock says.
McClintock writes that the stock’s slide means there’s probably not a lot of downside left. A low valuation, strong brand, and favorable position in the broader athletic industry are potential tailwinds for Under Armour.
The shares have notably underperformed peers: While apparel sales have suffered as consumers have less reason to leave the house, companies selling workout gear have seen a boost from Americans’ focus on fitness during the pandemic.
(NKE) shares are down 5% this year, trailing the broader market but comfortably ahead of Under Armour’s decline, while
Athletica (LULU) has jumped nearly 40%.
That gap has gotten too wide, says McClintock. “We believe that investors are overlooking the fact that Under Armour’s struggles prior to Covid, paradoxically, forced the company to position more defensively coming into the crisis,” he writes. His research shows that Under Armour products are less discounted than those from Nike and Adidas (ADDYY) on online channels, and the second quarter could be a bottom for fundamentals.
For now, however, the bears are still in charge. Under Armour is down 3.4% to $8.82 at the end of Monday.
Write to Teresa Rivas at firstname.lastname@example.org