From making moisture-wicking T-shirts in grandma’s basement to producing space suites for Virgin Galactic’s outer space initiative, Under Armour’s story sounds like the typical modern-day fairy tale...
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Fundamentals
But will the fairy tale come to an abrupt pause? Seeing as the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) has been probing its accounting practices for two years now. The probe was not made public until The Wall Street Journal reported on it on Monday ahead of the Q3 results.
Financial results for Q3 ending September 30, 2019, were released on Monday with an updated 2019 Full Year (FY) outlook. Revenue was down by 1 % to $1.4 Billion (flat on a currency-neutral basis) with apparel revenue increasing by 1%. On a year-to-date basis, apparel and footwear revenue are relatively flat, and accessories are down approximately 3% compared to 2018. The Gross margin increased by 220 basis points compared to the prior year, with total debt dropping 26% to $592 million.
Outlook
We might see the stock come under more pressure as fear sets in and the short-selling continue as it seems the market is ignoring the positive EPS forward outlook. If investors can look beyond the current noise, then they might see the turnaround back to growing revenue through innovation is high on the list of priorities. If current levels hold, then the stock might be attractive for long term investors, especially with average Wall Street analysts price target of $22.80 per share.
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Chart Life
The price action was under immense pressure from the news that surfaced, which saw the share price drop by over 15%. The share price moved well beyond the $16.62 per share level and is finding support at the crucial $16.57 support level. We might see lower levels targeted if the selling continues, which would give a better entry point as the stock might be undervalued.
Source - Bloomberg
Portfolio particulars
- Portfolio Hold (Current)*
- Portfolio Buy opportunity: Neutral**.
- WhatsTheBeef long term target price: Neutral.
Know your company:Under Armour Inc. (UAA)
- Under Armour was founded on September 25, 1996, by Kevin Plank, a then 24-year-old former special teams captain of the University of Maryland football team.
- Under Armour received its first big break in 1999 when Warner Brothers contacted Under Armour to outfit two of its feature films, Oliver Stone's Any Given Sunday and The Replacements.
- The iconic logo was born from the Under Armour name, which combining the “U” in “Under” with the “A” in “Armour” to form a very simplistic logo.
*Portfolio Hold (Current) refers to investors who already hold the stock within their portfolio.
**Portfolio Buy opportunity refers to Technical level crossed which might imply that the markets behaviour would support the outlook and Close above refers to a share price close above a Technical Resistance level.
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Barry is a market analyst with GT247.com, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.
