Analysts Target Under Armour as Sportswear Sector Buckles

Adidas' revenue warning yesterday is reverberating through the retail space

Digital Content Manager
Oct 21, 2022 at 10:23 AM
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The shares of Under Armour Inc (NYSE:UAA) are down 1.8% at $6.50 at last check, thanks to a downgrade from Telsey Advisory Group. The analyst downgraded Under Armour to "market perform" from "outperform," and lowered its price objective to $8 from $12. Telsey said the sportswear is likely offering deeper discounts than it once expected in order to move elevated inventory amid slowing demand -- pointing to similar scenarios for competitors like Nike (NKE) and Adidas.

Like many major retailers, UAA warned of this slowing demand back in August, which the company said would ding its margins. Telsey noted that things have been even worse than Under Armour initially predicted, however. Telsey isn't the only one targeting Under Armour. Yesterday, Oppenheimer slashed its price target by more than half, to $15 from $34. Adidas' warning on Thursday undoubtedly put up more sector-wide red flags, after the shoe company slashed its 2022 revenue forecast. 

Coming into today, analysts were already hesitant on Under Armour. Of the 22 in coverage, 12 called it a "hold" or worse. The equity could be open to more bear notes, however, as 10 analysts still consider the stock a "strong buy," and the 12-month consensus price target of $11.92 is an 82% premium to last night's close. 

It's been a dismal year for Under Armour stock, which has lost over 68% in the last 12 months. A familiar rejection level at the 80-day moving average sent UAA to a 12-year low of $6.38 on Sept. 30, and it looks like the stock could see even more lows, should today's negative price action continue. 

Short-term options traders are taking advantage of the selloff, with puts popular. This is per the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.52, which stands higher than all but 1% of readings from the past year. 

 

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