5 Reasons For Buckingham's Neutral Under Armour Position

After suffering one of the worst performances in the market last year, analysts are beginning to warm up to Under Armour Inc UAA's potential long-term turnaround.

The Analyst

Buckingham Research Group’s Eric Tracy initiated coverage of Under Armour with a Neutral and $17 price target.

The Thesis

Tracy outlined five reasons to hold Under Armour shares for the long-term. (See the analyst's track record here.) 

• A renewed focus by Under Armour's leadership on driving operational execution.
• A stabilizing revenue trajectory in fiscal 2018 and acceleration of top-line growth in fiscal 2019. 
• Buckingham projects Under Armour will capture margins through direct-to-consumer sales and greater international scaling that should help offset the struggling footwear segment.
• Improved product and channel segmentation strategy in North America.
• Investments to support a pipeline refresh in product innovation. 

While Tracy acknowledged that multiple issues persist at Under Armour, he said very low investor expectations and lowered consensus estimates on lowered guidance from management are creating a favorable upside scenario. 

Under Armour had a remarkable run of 26 consecutive quarters of revenue growth of 20 percent or greater, masking its operational issues, Tracy said. Now that the streak is over, management has an opportunity to fix these issues to set itself up for the next wave of expansion, he said. 

“A refocused CEO in Kevin Plank and the addition of industry executive Patrik Frisk and other senior exec changes should catalyze a leadership shift on operational execution with healthier, more profitable growth moving forward,” Tracy said.

Price Action

Under Armour stock closed down slightly Friday at $14.73. 

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Photo courtesy of Under Armour.