On Wednesday, Morgan Stanley reaffirmed its Underweight rating on Under Armour (NYSE:UA), Inc. (NYSE:UAA) with a steady price target of $4.00, representing significant downside from the current price of $6.27. According to InvestingPro data, analyst targets for UAA range from $4.00 to $14.50, with the stock currently showing mixed signals in terms of valuation. The firm’s analyst cited several factors for the decision, including the absence of full-year guidance and a low bar set for the first quarter results, which resulted in a lackluster response from the stock. The note pointed out that while near-term earnings per share (EPS) expectations appear to have less risk, there’s still potential for negative mid-term EPS revisions.
Under Armour has not provided specific guidance for the fiscal year, which is often a key detail for investors assessing a company’s future performance. The company’s first-quarter expectations were set at a level that analysts considered low, suggesting that the bar for the company to impress with its results was not high. InvestingPro data reveals that while the company isn’t currently profitable, with a -$0.47 EPS over the last twelve months, six analysts have revised their earnings estimates upward for the upcoming period.
Despite these conditions, Under Armour’s stock did not see significant movement, which the Morgan Stanley analyst attributed to the market’s already bearish stance on the stock. This suggests that investors had tempered their expectations and the confirmation of a cautious outlook did not come as a surprise.
The Morgan Stanley note also highlighted that while the immediate risk to EPS might be mitigated, there is still a possibility for future downward revisions to the company’s mid-term earnings projections. This outlook reflects concerns about Under Armour’s earnings stability and growth prospects.
Lastly, the analyst mentioned that the valuation downside risk and the limited visible signs of a successful turnaround for Under Armour contribute to the recommendation to stay Underweight on the stock. The price target of $4.00 remains unchanged, indicating the firm’s assessment of the stock’s value in light of the risks identified. InvestingPro analysis shows the company maintains a moderate debt level with a current ratio of 2.1, suggesting adequate liquidity. For deeper insights into Under Armour’s valuation and comprehensive financial analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Under Armour, Inc. reported a fourth-quarter loss per share of $0.08, aligning with expectations from both BofA Securities and Visible Alpha. The company’s revenue for the quarter was $1,181 million, representing an 11.4% decline year-over-year, though this was less than anticipated. Despite the revenue decline, Under Armour’s gross margin improved by 170 basis points to 46.7%, surpassing various estimates. For the first quarter of fiscal year 2026, Under Armour forecasts adjusted earnings per share between $0.01 and $0.03, exceeding the Street’s expectation of $0.00, although a 4-5% revenue decline is anticipated.
Analysts have adjusted their outlooks following these developments. BofA Securities lowered the price target for Under Armour to $8.00, maintaining a Neutral rating due to anticipated short-term challenges. Evercore ISI and JPMorgan both reduced their price targets to $6.00, with Evercore ISI maintaining an Underperform rating and JPMorgan keeping an Underweight rating, citing competitive pressures and limited pricing flexibility. Truist Securities maintained a Hold rating with a $9.00 target, suggesting investor sentiment might improve with evidence of business recovery. Stifel analysts noted the company’s turnaround efforts are on track, highlighting the improved gross margin and expressing cautious optimism for growth in North America.
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