Upgrade Brings Under Armour, Inc. (UA) Bulls to the Door

An analyst upgrade has Under Armour Inc (NYSE:UA) heading higher, and more gains could be in store

by Josh Selway

Published on Jun 5, 2015 at 11:15 AM
Updated on Jun 5, 2015 at 11:31 AM

Under Armour Inc (NYSE:UA) spent the entirety of May consolidating just below $80. Today, the shares eclipsed that mark -- adding 3.8% to trade at $80.96 -- and are poised to close north of their 10-week moving average for the first time since April 24. In the options arena, calls are crossing at seven times the expected rate, and more than double put volume.

Leading the way by a large margin is the weekly 6/26 85-strike call. Data makes it safe to assume buy-to-open activity is happening here, as traders bet on UA to top $85 before the close on Friday, June 26, when the weekly options expire.

Looking at options expiring within the next three months, there's been a clear preference for UA calls over puts. The stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.76 -- only 3 percentage points from a 12-month low. In other words, speculative players have rarely been as call-heavy toward UA as they are now.

You can't really blame the call-focused traders that are buying to open the options, as the equity has been a long-term outperformer. Year-over-year, UA has added 44.5%. 

Even so, many remain unsure of the athletic apparel name. Short interest increased 14.4% during the two most recent reporting periods. Now, the 13.8 million shares that are sold short would take over seven sessions to repurchase, at typical trading volumes.

Along the same lines, 11 of 26 analysts still only consider Under Armour Inc (NYSE:UA) a "hold" or "strong sell." Just last night, though, D.A. Davidson upped its outlook to "buy" from "hold." If UA can extend today's gains, it wouldn't be surprising to see it get a boost from a short-covering rally and/or more positive analyst attention. 

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