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Under Armour: Down For The Count?


  • Under Armour crashed following disappointing Q3 results.
  • The news leading up the report signaled the potential weakness.
  • The performance sports brand has plenty of expansion opportunities, but turnarounds are historically difficult to time.

Under Armour (NYSE:UA, NYSE:UAA) posted hideous Q3 results that have bears piling on an already negative situation. My previous research though highlighted this very exact scenario playing out.

The Under Armour Class A shares closed the day at $12.52 and are now trading around $12.00. The question is whether breaking even the bearish Wells Fargo $13 price target is the ultimate buying opportunity.

Leading up to the Q3 results, investors got hints that business wasn't going that well. The Wall Street Journal reported on October 23 that the performance sports apparel company was looking at exiting categories like tennis and fishing. Naturally, the primary reason to drop categories are disappointing results and the need to streamline operations.

This news was troubling and led to my tweeting the night prior to earnings that Q4 guidance could be ugly.

Ironically, Under Armour didn't officially announce any such decisions along with the Q3 results, but the company might want to wait until after the holidays and make such moves along with the Investor Day next year.

The Q3 numbers were indeed ugly with revenue down 5% to $1.4 billion as North American wholesale revenue declined by 13% to $880 million. International revenues were up a strong 35% and footwear actually held steady with 2% growth to $285 million.

So despite seeing value in the stock with a strong brand trading at a low P/S multiple in comparison to a Nike (NKE), my desire to actually load up on the stock was reduced. Stocks in a deep downtrend are very difficult to turn around with the bottom unknown, and Under Armour proved this reality with a horrendous Q3 and weak holiday guidance as inventory soars.

Incredibly, the stock only has a market value of $5.5 billion now with sales approaching $5 billion this year. The problem is that

This article was written by

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Stone Fox Capital Advisors, LLC is a registered investment advisor founded in 2010. Mark Holder graduated from the University of Tulsa with a double major in accounting & finance. Mark has his Series 65 and is also a CPA.

Stone Fox Capital launched the Out Fox The Street MarketPlace service in August 2020.

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Analyst’s Disclosure: I am/we are long UAA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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