Analyst: 'Trade Opportunity' Ahead of Under Armour Earnings

A solid report next week could shock a lot of UAA bears

by Andrea Kramer

Published on Apr 27, 2018 at 2:36 PM
Updated on Jun 24, 2020 at 10:16 AM

The shares of athleisure concern Under Armour Inc (NYSE:UAA) are surging this afternoon, as analysts wax optimistic ahead of the company's earnings next week. Stifel said upbeat results from sector peer Columbia Sportswear (COLM) bode well for Under Armour, and that heavy short interest presents a "trade opportunity" on UAA stock ahead of earnings. Meanwhile, Jefferies opined that credit card data points to strong growth for the company, which is only just starting to tap into the potential of international markets.

UAA stock was last seen 6.3% higher to trade at $17.97. The equity has added nearly 58% since its November lows south of $12, with help from a post-earnings bull gap in February, and is now on pace to topple its 320-day moving average for the first time since 2016.

under armour stock chart

Under Armour is slated to report earnings on Tuesday, May 1. Over the past five quarters, UAA stock has moved a huge 17.1%, on average, the day after earnings, regardless of direction. This time around, the options market is pricing in a smaller-than-usual one-day move of 13.6% for the security, per at-the-money implied volatility data.

However, it appears recent options buyers are speculating on a negative earnings reaction for Under Armour this time around. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.00 is higher than 76% of all other readings from the past year. This demonstrates a healthier-than-usual appetite for bearish bets over bullish on UAA lately.

As alluded to by Stifel, Under Armour stock is also heavily shorted. In fact, short interest represents nearly 13 days' worth of pent-up buying demand, at UAA's average pace of trading.

Meanwhile, today's upbeat analyst attention is relatively rare for the athleisure concern. Although UAA shares have outperformed the broader S&P 500 Index (SPX) by more than 29 percentage points during the past 60 sessions, 26 out of 30 brokerage firms maintain tepid "hold" or worse ratings. Likewise, the average 12-month price target among analysts is just $14.48 -- a 19.4% discount to UAA's current price.

In conclusion, should Under Armour report stronger-than-expected earnings next week, the stars may be aligned for a mass exodus of skeptics. An unwinding of pessimism among options traders, a short squeeze, or a flood of bullish analyst attention could all translate into additional tailwinds for UAA shares next week.


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