On Monday, BMO Capital adjusted its outlook on Under Armour Inc (NYSE:UAA), increasing the price target to $11 from the previous $10 while maintaining an Outperform rating on the stock. The firm's analyst highlighted Under Armour (NYSE:UA)'s position as one of the largest brands historically, noting a discrepancy between its significant revenues and less impressive profits.
The analyst pointed out that Under Armour's new strategy, "Achieve More by Doing Less," aligns with their long-standing advice for the company to "Sell Less, Charge More, and Earn More." This shift in approach is already being implemented by the company, which could lead to substantial earnings growth.
The report from BMO Capital delves into the details of Under Armour's margins, sketching a potential earnings power of approximately $0.60 to $1.09 per share. This improved earnings outlook is the basis for the revised price target, which suggests a stock value in the range of $10 to $12, with a possible "blue-sky" scenario of around $16.
The analyst's commentary underscores the belief that Under Armour's strategic pivot towards prioritizing profitability over volume could pave the way for a stronger financial future. The firm's analysis indicates that if Under Armour continues on this trajectory, it could realize significant earnings potential and an enhanced share price.
In other recent news, Under Armour reported a surprising profit in its first quarter, leading to an upward revision of its annual profit forecast. The sportswear company attributes this success to a strategic shift toward selling higher-margin items and reducing inventory.
Under Armour also revealed plans to incur additional restructuring charges estimated at around $70 million in fiscal years 2025 and 2026, following their decision to shut down a major distribution center in Rialto, California. Despite these new charges, the company has preserved its prior operating income forecast for fiscal year 2025.
In terms of executive changes, Eric J. Aumen will assume the role of principal accounting officer from October 1, 2024. This announcement was made during Under Armour's recent Annual Meeting of Stockholders, where several other key decisions were also approved. These developments are part of Under Armour's broader restructuring initiative aimed at revitalizing its brand and improving its market position.
Analysts have displayed differing outlooks on Under Armour. While Telsey Advisory Group and Williams Trading have increased their price targets, Morgan Stanley (NYSE:MS) downgraded the stock due to concerns about limited growth prospects. However, UBS maintained its Buy rating on Under Armour shares, keeping its price target steady. These are the recent developments for Under Armour as it navigates the competitive sportswear market.
InvestingPro Insights
InvestingPro data and tips offer a deeper dive into Under Armour Inc's (NYSE:UAA) financial health and market performance. With a market capitalization of $3.22 billion, Under Armour operates with a moderate level of debt and liquid assets that exceed short-term obligations. Despite a challenging period with a revenue decline of 5.15% over the last twelve months as of Q1 2023, analysts have revised their earnings upwards for the upcoming period, suggesting optimism in the company's future profitability.
While Under Armour has not been profitable over the last twelve months, analysts predict the company will turn a profit this year. This aligns with BMO Capital's positive outlook and Under Armour's strategic shift to "Achieve More by Doing Less." The stock's price movements have been quite volatile, yet InvestingPro Tips indicate that the company's P/E ratio stands at 16.81, and the PEG ratio, a metric that measures stock value while taking earnings growth into account, is notably low at 0.31, hinting at potential for growth.
For investors interested in Under Armour's future prospects, additional InvestingPro Tips related to the stock are available, providing a comprehensive understanding of the company's financial and market position. To explore these insights further, visit https://www.investing.com/pro/UAA for a total of 7 InvestingPro Tips that could inform your investment decisions.
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