Wells Fargo thinks that Under Armour Inc UA is one company with a strong growth story and enough opportunities to expand its P&L. The firm didn't find any issues in the growth prospects for the year 2017. Therefore, the brokerage upgraded shares to Outperform and boosted the valuation range from $38-$42 to $44-$46.
Analysts Tom Nikic and Ike Boruchow believe that distribution expansion would re-accelerate the company's revenue growth pace in the next 1 1/2 years. They found that Under Armour is still in the initial growth stage with ample opportunities to narrow its gap with its rivals like Nike Inc NKE at the international level.
In a note, the brokerage said, "While [The Sports Authority] had become a significantly smaller piece of the UA pie over the years (3-4% of sales vs. a peak of 15% ten years ago), the loss of revenue in this key distribution channel should persist into early 2107 (UA still shipped to them partially into Q2). That said, we believe the puts/takes of distribution-related factors troughs inQ3and turns favorable in early-2017."
Wells Fargo pointed out improving levels of inventory both within the company, as well as at retail partners. The firm cited inventory growth since 2015 and remained at about 40–45 percent growth pace in early this year.
The brokerage thinks that if the company failed to maintain industry-leading top line growth, then the stock could be under pressure.
At last check, the stock traded at $38.33, up by $0.55, or 1.46 percent.
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