Under Armour shoes.
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Shares of Under Armour are a good bet for 2022 thanks to its earnings outlook and revenue potential, according to Baird.
Class A shares (ticker: UAA) of the athletic apparel retailer were up 1.2%, at $21.49, in Tuesday trading. In 2021, Class A shares had a return of 23.41%, while Class C shares (UA)—which don’t carry voting rights—had a return of 21.24%, according to Dow Jones Market data. The company’s long-term outlook seems strong.
Baird analyst Jonathan Komp upgraded the stock to an Outperform rating with a price target of $32—a 49% upside—from its previous Neutral rating with the same price. He cited several reasons for this in a research note Tuesday.
“We have been warming to the UAA story for much of the past year based on our positive view of management’s transformation actions aimed at improving full-priced selling in North America,” Komp wrote.
The company’s return on investments in marketing have bode well so far. Those investments will continue into 2022, CEO Patrik Frisk said on the company’s third-quarter earnings call with investors back in November.
Revenue growth is expected to be 25% for the full year, up from previous guidance in the low 20% range, the company said in November. Margins are expected to expand 1.3 percentage point, up from previous guidance of a 50 to 70 basis point improvement on last year’s adjusted gross margin of 48.6%. (A basis point is 1/100th of a percentage point.)
Komp thinks this is a conservative outlook.
“Based on signs of continued momentum and, in our view, limited discounting activity, we see potential for UAA to beat the implied Q4 revenue target by ~5%,” he wrote.
Komp also expects full-year adjusted earnings per share above 80 cents.
Write to Logan Moore at [email protected].
