Under Armour: Buy Now Or Never?

Investing in Under Armour is a tricky prospect. The company's stock price has been in decline, falling 21% in the last six months of 2019, and 7.46% in the year to June 2024. However, Under Armour's stock is currently on an upward trajectory, rising 12.46% from its 52-week low. The company's revenue grew 27% in 2021, and profit margins are trending up. Under Armour's CEO Patrik Frisk has been credited with getting the brand more focused on serving the customer while also bringing costs down. Inventory levels are reportedly the healthiest they've been in the last decade, indicating that supply is better aligned with demand. However, the company has faced federal investigations into its accounting practices, and in 2022, Frisk stepped down as President and CEO. In summary, while Under Armour's performance has improved in recent years, it's difficult to predict whether now is a good time to invest.

Under Armour's stock price and performance

Under Armour Inc. (UAA) is traded on the NYSE exchange. As of June 2024, the Under Armour stock price was $6.95, down 3.34% from the previous day, and down 7.46% from the previous year. The stock has underperformed other stocks in the apparel manufacturing industry by 0.43 percentage points. The 52-week low and high of the stock were $6.18 and $9.50, respectively.

In 2021, Under Armour's revenue grew by 27% to $5.7 billion, and the company's profit margins were trending upwards. The gross margin improved to 50.4%, partly driven by strong pricing and the exit of the MyFitnessPal business. The operating margin also rebounded. Inventory levels were reported to be the healthiest they had been in the last decade, indicating that supply was well-aligned with demand.

Despite the positive financial indicators, Under Armour has faced challenges such as the impact of the COVID-19 pandemic, supply chain issues, and pockets of weakness in certain markets, such as Latin America. The company has also been under federal investigation regarding its accounting practices, which has led to some negative headlines.

Analysts' recommendations on Under Armour stock vary, with some suggesting a "Hold" rating and others predicting a Bull Run for the stock. As of June 2024, there were 436.5 million shares of UAA outstanding, and the market capitalisation was $3.03 billion. The company's latest earnings announcements and leadership transitions can also be monitored to inform investment decisions.

The company's leadership and board changes

Under Armour has undergone several leadership and board changes in recent years. In April 2022, Patrik Frisk stepped down as President, Chief Executive Officer (CEO), and member of the Board of Directors. Frisk, who joined the company in 2017, helped develop Under Armour's long-term strategic plan, emphasising its commitment to athletic performance by restructuring its systems and go-to-market process. During his tenure, the company delivered industry-leading products, strengthened consumer relationships, and advanced its purpose, vision, mission, and values.

Following Frisk's departure, the board appointed Colin Browne, the Chief Operating Officer (COO) at the time, as interim President and CEO while a comprehensive internal and external search for a permanent successor was conducted. Frisk remained with the company as an advisor until September 1, 2022, to ensure a seamless transition.

On February 27, 2023, Stephanie Linnartz joined Under Armour as President, CEO, and member of its Board of Directors. Linnartz's appointment brought additional leadership changes, including the appointment of Yassine Saidi as Chief Product Officer and Kara Trent as President of the Americas, both reporting directly to her. Shawn Curran, a retail industry veteran, was appointed as the Chief Supply Chain Officer, and John Varvatos, a fashion industry veteran, joined as the Chief Design Officer.

In February 2023, Under Armour also announced the appointment of Carolyn Everson and Patrick Whitesell as members of its Board of Directors, with longtime member Harvey Sanders retiring from the Board the following month.

The latest leadership change came in April 2024, when Kevin Plank became President and CEO of Under Armour, replacing Stephanie Linnartz.

Under Armour's financial health and outlook

Under Armour's stock price has been volatile in recent years, with periods of strong performance followed by significant declines. As of June 2024, the stock price is around $7, down from its 52-week high of $9.50. The company's market capitalisation is $3.03 billion, with 436.5 million shares outstanding.

Analysts' recommendations on Under Armour's stock vary, but the consensus is to "hold". Some analysts have recently lowered their price targets for the stock, reflecting a more cautious outlook. Under Armour's financial performance has been mixed in recent years. While revenue grew by 27% in 2021 to $5.7 billion, the company has also faced challenges such as the impact of the COVID-19 pandemic and supply chain issues.

Under Armour's profit margin has declined from 6.3% to 4.1% in the past year, and the company's debt has increased relative to shareholder equity. However, the company has made efforts to improve its financial health, including the sale of its MyFitnessPal platform for $345 million in 2021. This sale helped improve Under Armour's gross margin to 50.4% and rebound its operating margin. Inventory levels are also reported to be the "healthiest they've been in the last decade", indicating better alignment between supply and demand.

Under Armour's current valuation is at a discount compared to its competitors in the athletic apparel industry, such as Nike and Lululemon. This could indicate that the stock is undervalued, especially if the company continues to deliver profitable growth. However, it is important to note that Under Armour's stock has underperformed its peers in the apparel manufacturing industry over the past year.

In summary, Under Armour's financial health appears to be improving, with efforts to drive operational efficiency and focus on profitable growth. However, the company still faces challenges, including increasing competition and the impact of global events. The outlook for Under Armour's stock is uncertain, with analyst recommendations ranging from "hold" to "buy". Investors should carefully consider the risks and conduct comprehensive research before making any investment decisions.

The company's brand and product strategy

Under Armour is a leading inventor, marketer, and distributor of branded athletic performance apparel, footwear, and accessories. The company offers its products in compression, fitted, and loose-fit types, with footwear for running, training, basketball, and outdoor applications. Under Armour also provides accessories such as gloves, bags, headwear, and socks. The company engages in brand licensing, digital subscription, advertising, and other digital business activities.

Under Armour's brand strategy focuses on performance and empowering human performance. The company has signed deals with top athletes, including basketball star Stephen Curry and golfer Jordan Spieth, to endorse its products. Under Armour is also known for its partnerships with organisations such as USA Football, the U.S. National Team, and the National Lacrosse League. The company has also ventured into space by creating spacesuits for Virgin Galactic astronauts. Under Armour's commitment to athletic performance is evident in its long-term strategic plan, which involves reengineering its structure, systems, and go-to-market process.

The company's product strategy involves delivering industry-leading, innovative products that serve the customer. Under Armour has a disciplined approach to managing costs and focuses on profitable growth. The company has improved its gross margin and operating margin while also reducing costs. Under Armour's inventory levels are healthy, indicating that supply is well-aligned with demand, which contributes to strong margin performance. The company has also made leadership changes to support its Protect This House 3 (PTH3) strategy. Under Armour is committed to creating better representation in sports worldwide and has a core value of 'Stand for Equality'.

Analyst recommendations and consensus on Under Armour stock

Analysts' recommendations on Under Armour stock vary, with some rating it as a hold and others suggesting it is a good buy. As of June 2024, the consensus analyst rating on Under Armour stock is a hold. However, it is important to note that analyst forecasts and ratings are not stock recommendations or investment advice.

According to a source dated June 4, 2024, the Under Armour stock price was $6.95, down 3.34% from the previous day and 7.46% in one year. The stock has underperformed other stocks in the apparel manufacturing industry. The market capitalisation of Under Armour stock is $3.03 billion, with 436.5 million shares outstanding as of June 3, 2024.

Despite facing federal investigations into its accounting practices, Under Armour's stock has performed well over the last decade. A $1,000 investment in 2009 would have been worth more than $4,700 as of November 22, 2019, a total return of around 370%. In comparison, the S&P 500 had a total return of around 250% during the same period.

Under Armour's revenue grew 27% in 2021, and profit margins are trending upwards. The company's gross margin improved to 50.4% in 2021, and its operating margin rebounded. Under Armour's inventory levels are also healthy, indicating that supply is well-aligned with demand, which should contribute to strong margin performance.

Under Armour's share price is currently undervalued compared to its competitors in the athletic apparel industry, such as Nike and Lululemon. The company's focus on performance over fashion has hurt the brand in recent years, as competitors' sales have skyrocketed while Under Armour has struggled. However, Under Armour is making moves to improve its brand image and is partnering with celebrities and releasing high-profile collaborations.

In summary, analysts' recommendations on Under Armour stock vary, with the consensus being a hold. The company's stock price and performance have been mixed in recent years, with some downward trends but also signs of recovery and growth. Investors considering Under Armour stock should carefully evaluate the company's financial metrics, analyst forecasts, and their own risk tolerance before making any investment decisions.

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