Under Armour Shares Decline as Analysts Question Transformation Plan
On Friday, Under Armour's shares continued their downward trend, declining by as much as 8.8% following the previous day's drop. This decline came after analysts assessed the future of the sports company following its investor day held on December 12. The presentation led to a 13% decline in shares over the week as market participants evaluated the details and implications of the company’s strategy.
BMO Capital expressed measured optimism, noting that despite the investor day being weak in terms of figures, Under Armour emphasized its strategy to make the brand "premium" and indicated that significant marketing efforts are on the horizon. The firm sees potential in the company's EBITDA per share opportunity but expects the shares to maintain a model of rising and then declining to higher lows as Under Armour seeks to regain investor appreciation.
Conversely, Morgan Stanley maintained a cautious stance, suggesting that while Under Armour's forward plan is clear and the new leadership is reliable, the market remains skeptical about the timing of the company’s turning point. The firm did not change its Underweight thesis due to the early stage of the transition and earnings per share risks for future years, as well as other concerns.
BofA Securities highlighted positive feedback from retail partners, particularly concerning Under Armour's footwear line. The return of founder Kevin Plank as Chairman and CEO was emphasized, along with a safe perspective on guiding a successful turnaround. However, BofA noted that the company is still at the beginning stages of enhancing its products and reducing promotions, both of which are crucial for improving margins.
TD Cowen adjusted its expectations regarding Under Armour's marketing expenditures, forecasting increased costs in line with the company's goal to reposition its brand. The firm raised its target price to $11, based on optimism for a product-focused transformation, while also acknowledging competitive risks.
Needham's analysis revealed that while the investor day was qualitatively beneficial, it lacked quantitative detail. The CFO reiterated guidance without a formal presentation, and although the core strategies made sense, the implementation still raises questions. The firm projected that evidence of transformation would need to be seen at least until the Fall/Winter 2025 season.
Telsey commented on management's understanding of challenges and vision for the brand’s future. However, the lack of a clear timeline for growth and the need for further retail partnerships and a rebalance in physical retail distribution prompted the firm to seek more details on product and distribution plans.
Finally, Truist pointed out increasing positivity regarding product innovations and opportunities but emphasized that visibility on future growth remains limited at this early stage of transformation. They indicated a need for more concrete data points showing how new products and strategies are driving growth.