By Sam Boughedda
Stifel upgraded Under Armour Inc (NYSE:UAA) (NYSE:UA) to Buy from Hold, raising its price target on the stock to $12 from $9 in a note to clients on Monday.
Analysts said in a note to clients that relative inventory management discipline leaves Under Armour with better margin certainty and in a better position to bring newness to market in CY23.
In addition, the analysts said the firm "expect systematic risk from an inventory glut of larger competitors clears by 2H."
"Considering the inventory glut across footwear and apparel complex, the proactive decision to cut orders was prescient. Looking forward, a refined strategy opens the aperture for the brand to expand beyond athletic performance to address other wearable occasions in a young athlete's lifestyle. This triples the addressable market and opens new avenues to growth," they wrote.
"With tightening lead-times, we see tailwinds to cash flow in CY23 and believe net cash balances could be >25% of the current market cap. With a strong balance sheet, improving earnings and new leadership (CEO announcement expected this month), we expect investor focus shifts to growth and structural margin opportunities. Our 12 mos. TP of $12 per share represents 8.4X TEV/EBITDA on FY25 EBITDA estimates of $602mn," they concluded.