On Thursday, Under Armour Inc.'s (NYSE:UAA) stock price target was reduced by CFRA to $4.00 from the previous $5.00. The firm retained a Sell rating on the stock. The adjustment reflects a continued bearish stance on the company's performance in comparison to its rivals, Nike (NYSE:NYSE:NKE) and Lululemon (NASDAQ:LULU).
The new price target is based on a multiple of 16.0 times CFRA's fiscal year 2025 (ending in March) earnings per share (EPS) estimate.
Under Armour (NYSE:UA) reported a normalized fourth-quarter EPS of $0.11, which was $0.03 higher than consensus estimates, on revenues of $1.33 billion. This revenue figure was marginally above expectations by $5 million but fell short of the prior year's $1.40 billion.
The company experienced a 7% year-over-year decline in wholesale revenues, while direct-to-consumer revenue remained unchanged. Despite these challenges, the fourth quarter saw an expansion in adjusted gross margin by 170 basis points year-over-year to 45.0%, aided by reduced product and freight costs.
The sportswear manufacturer also reported a 19% year-over-year decrease in inventory, which stood at $958 million. In an effort to address its underwhelming performance, Under Armour has announced a new restructuring plan. Still, the financial guidance for fiscal year 2025 provided by the company was below market expectations, projecting revenues to decline by low double-digits and an adjusted EPS of $0.18 to $0.21.
CFRA's revised EPS estimate for fiscal year 2025 is now $0.25, a decrease of $0.25 from their previous forecast. Moreover, CFRA has initiated an EPS estimate of $0.35 for fiscal year 2026. The firm's stance remains negative, citing the need for Under Armour to demonstrate a turnaround in operating efficiencies before a more positive outlook can be considered.
InvestingPro Insights
Under Armour's current market dynamics present a mix of challenges and opportunities according to the latest data from InvestingPro. With a market capitalization of $2.94 billion and a price-to-earnings (P/E) ratio of 7.29, the company is trading at a low earnings multiple, which might attract investors looking for value opportunities. This is further supported by the company's ability to cover its interest payments with cash flows and maintain liquid assets that exceed short-term obligations.
The stock's volatility is notable, with price movements suggesting a higher risk profile for investors. Still, the InvestingPro Tips indicate that analysts are optimistic about the company's profitability in the upcoming year, which could be a positive sign for potential investors. In addition, the company has operated with a moderate level of debt, which can be a stabilizing factor.
Investors should be aware that Under Armour does not pay dividends, focusing instead on reinvesting earnings back into the company. For a more comprehensive set of insights and to access additional InvestingPro Tips on Under Armour, visit https://www.investing.com/pro/UAA. There are 7 additional tips available, which could provide deeper analysis and guidance. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enriching your investment research with advanced metrics and expert insights.
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