Why Cowen Expects Under Armour To Recover Its Brand Momentum

The consensus estimates for Under Armour Inc UAA appear conservative through fiscal 2023 given the company’s improving revenue trajectory, gross margin expansion, and mix shift toward direct-to-consumers, according to Cowen.

The Under Armour Analyst: John Kernan upgraded Under Armour from Market Perform to Outperform and raised the price target from $17 to $23.

The Under Armour Thesis: The company’s prospects have become brighter with its expansion in Asia, which is its highest gross margin segment, and potential upside to planned restructuring-related savings, Kernan said in the upgrade note.

“Our recent checks suggest improved wholesale sell through at key U.S. wholesale sporting goods partners with lean inventory levels. We view implied Q4:20E guidance on revenue and EPS as conservative,” the analyst said.

“We anticipate a recovery in brand momentum that is above consensus estimates into FY22,” the analyst further wrote.

Cowen raised its earnings estimates for fiscal 2021 and 2022 from 12 cents to 21 cents per share and from 31 cents to 42 cents per share, respectively, significantly higher than Street expectations of 13 cents per share and 29 cents per share.

UAA Price Action: Shares of Under Armour were down 1.23% at $18.40 at last check Tuesday. 

Photo: Under Armour.