Under Armour Stock (NYSE:UAA) Bounces Off 52 Week Lows

Under Armour stock (NYSE: UAA) was not immune to yesterday's pullback, hitting a 52-week low at $6.17, before stabilising to end the day at $6.37. Despite the pre-market indicating gains of 1% for UAA, the sportswear giant is currently facing significant challenges within the retail sector, which have triggered a notable drop in share value, translating to a -26% change since the beginning of 2024.

Under Armour's recent hardships are compounded by a hefty legal settlement. The company has reached a resolution to a 2017 shareholder class action lawsuit, agreeing to pay $434 million. To manage this settlement, Under Armour plans to utilise both its cash on hand and available credit facilities, which introduces a new tier of financial uncertainties for the business.

View from the Bulls – Despite these adversities, investment banking firm UBS has maintained a positive outlook on the company, reaffirming a Buy rating. UBS predicts that Under Armour's first quarter report for the year 2025 will align with expectations, and has reiterated its earnings per share (EPS) guidance of $0.18 to $0.21 for 2025. The endorsement from UBS hints at potential resilience in Under Armour's business model and enduring investor confidence.

View from the Bears – Conversely, Morgan Stanley has taken a cautious stance on Under Armour. The financial services company has downgraded the sportswear brand from Neutral to Underweight, establishing a new price target of $4.00. This reflects Morgan Stanley's concerns regarding limited growth prospects for Under Armour and the likelihood of negative earnings revisions in the future.

Comparison with industry peers can at times provide insight into a company's performance. For instance, Skechers shares (NYSE: SKX) have gained 9% over 12 months as the competitor in the footwear and apparel industry received an upgrade from Morgan Stanley from Neutral to Overweight. This upgrade hints at Morgan Stanley's anticipation of further positive earnings per share revisions over the coming twelve months for the company.

Under Armour's financial performance, while currently under pressure, still shows areas of strength. The company holds a P/E ratio of 12.01 and a Price/Book ratio of 1.3, indicators that some investors may interpret as signs of an undervalued stock. Additionally, with a revenue of $5.7 billion over the past twelve months and a substantial gross profit margin of 46.13%, Under Armour continues to demonstrate profitability. The operating income margin for the company stands at 4.14%, reflecting the company's operational efficiency amidst revenue contractions.

Despite the current challenges reflected in the stock price volatility and the retail sector's broader issues, analysts have forecasted that Under Armour will remain profitable through the year factoring in its past performance.

The company's resilience and potential for weathering the storm of the retail industry's shifting sands will be closely watched by investors and analysts alike. The volatile market behaviour serves as a reminder of the rapid changes and uncertainties inherent in the sector.