Under Armour Drops as J.P. Morgan Resumes Coverage at Neutral

J.P. Morgan has a $23 price target on shares of Under Armour.
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Under Armour (UAA) - Get Report dropped big on Monday after analysts at J.P. Morgan resumed coverage of the stock with a neutral rating after previously having an outperform rating on shares of the sports apparel maker.

Under Armour was down nearly 5% to $20.70 after analysts at the firm also established a $23 price target on the shares.

J.P. Morgan’s channel checks suggest that Under Armour’s fourth-quarter revenue will be below consensus by nearly a point - J.P. Morgan expects 4.7% growth vs. Wall Street’s estimate of 5.7% growth. As a result, the firm lowered its fiscal 2020 revenue growth estimate below consensus estimates – 3.8% at J.P. Morgan vs. 4.7% on Wall Street – as well as its EBIT estimate of $298 million vs. $311 million consensus.

“Larger picture – we will closely monitor the impact of the aforementioned initiatives largely laid out at our May 2019 HQ visit noting domestic brand interest as measured by Google Trends unchanged over the past 3 months versus 3Q and remaining materially below levels a year ago,” analyst Matthew Boss wrote.

Under Armour’s management has expressed optimism for improvement in the North America sector in the second half of 2020 as it steps up product innovation in the spring quarter, but Boss is in wait-and-see mode on whether those innovations pay off.

The headwinds against the company are numerous, according to Boss, including gross margins that are worse than expected and revenue growth that has faltered due to a lack of impact from the company’s attempts at product innovation.