Following a positive review of Under Armour’s quarterly earnings and sales report on May 2, much has been given to the company’s credit for it to be in the position as one of the best stocks to watch in the coming months.
Top retail and JP Morgan analyst Matthew Boss sees a come back from Under Armour as he raises his rating of the company’s stock to overweight from neutral, and hiking his price target to $29 from $23 Friday, May 17.
With the implementation of the company management’s 3-year strategic ‘shrink phase,’ Boss describes the company’s shift from ‘protect’ to ‘attack’ mode. “The fire seems to be back,” he says after his meeting with the management, including CEO Kevin Plank, at the sportswear maker’s headquarters in Baltimore.
Boss predicts that there will be a tremendous amount of earning power in the next two years for the athletic performance wears company, while for the next five years, he foresees a 40% earnings growth on average.
He attributes this to two things. One is a robust athletic marketplace valued at $92 billion that Under Armour makes up only roughly 5% – 6%. And, the other being that the company has now taken into itself to fix its internal operations and hone in on creating a niche as an athletic performance apparel company. The company is now veering away from the athleisure trend that they have failed to capture, but other companies such as Lulu Lemon and Nike have capitalized on in the past two years.
Under Armour came into 2019 swinging by fixing their internal operations to consequently bolster their stocks strength in the months and years to come. Boss shares that in the meeting with company executives Monday, key factors that indicate better company performance this year includes a disciplined FY20 global top and bottom-line growth acceleration, where Boss says “they’ve rationalized queue by 50%, they’ve cut their vendor base by 30%, and they’ve shortened the lead times by 25%. They’re overhauling the marketing.”
While we see a positive stock performance on the retail industry, particularly on other athletic performance companies such as Nike, Adidas, and Lulu Lemon, we also see Under Armour catching the same wave. But up ahead is a challenge in the guise of Trump’s trade war against China. It remains to be seen how Under Armour will resolve this.