New Under Armour Price Target Amid Leadership Shakeup

Back on January 6, we re-introduced Under Armour (UA) ,  (UAA)  to the "Stocks Under $10" series after a multi-year layoff. Though I hold the C shares (UA), for charting purposes, we'll use the A shares (UAA) as those are the shares that actually have one share-one vote rights, while the Class Cs have no voting rights.

Not that it matters, as founder and CEO Kevin Plank owns all of the B shares, which are not listed. Those shares have 10 votes per share and afford Plank a rough 65% control of the company. The only reason I own the C shares was an error made in order entry and, since the two do chart very closely together, I never bothered correcting that error.

The fun fact is that the shares are up 11.3% over the three weeks since we became involved. Under Armour has very quietly, at least for now, joined the ranks of our "Stocks Under $10" portfolio/column success stories, which is quite a group indeed.

Earnings and More 

Under Armour is expected to report ahead of the opening bell on Friday, February 6. Wall Street is currently looking for an adjusted EPS of -$0.01 on revenue of slightly more than $1.3 billion. That would compare somewhat poorly to the $0.08 reported for the same period one year ago while reflecting year-over-year sales "growth" of -6.4%. Of the 23 sell-side analysts that cover Under Armour, 22 have revised their earnings estimates for the period lower since the start of the quarter. Does that bother me? 

No, actually it does not. Consensus view for the EPS print has improved by a penny per share over the past three weeks. I told readers in that early January piece that Jay Sole, a TipRanks' four-star rated (by late Tuesday) analyst at UBS, had reiterated his "Buy" rating on the stock and his $8 target price. 

At the time, Sole wrote that Under Armour remains one of the world's best-known and liked athletic wear brands and adds that investors are "materially" undervaluing the brand. Sole saw the stock as a potential turnaround story and sees the firm possibly "achieving a five-year EPS compounded annual growth rate of 25%."

Since then, Paul Lejuez (five stars) who has never liked the stock and has a "hold" rating on the shares, increased his target price from $5.00 to $6.20. Finally, late on Tuesday, Peter McGoldrick of Stifel Nicolaus (three stars) reiterated his "buy" rating on Under Armour and his $9 target price.

Change

Mid-month, the firm announced that effective February 2, there will be changes made to the firm's C-Suite. Kara Trent will transition out of the role of firm president to become chief merchandising officer. Adam Peake, who is currently the senior VP of strategy, will take over as president. Yassine Saidi, who was already chief product officer, will become the senior advisor for design and expression, which is a new position. Kevin Plank will remain CEO.

The Chart​

Readers will see the breakout from the falling wedge pattern of bullish reversal ​that provoked my long position. That breakout is now extended. Readers who jumped on board with us will recall that we had a $7 target price on the shares.

The stock had retaken its 200-day SMA, currently at $5.60, which was and is our pivot. This has brought some professional managers on board though others will avoid the name until it trades above $10. Others have a rule about not investing in stocks that trade under $5.

Relative strength now exists in technically overbought territory. However, the daily MACD is still postured bullishly. All three components are positive with the 12-day line still running above the 26-day line.

Target Price: $7.50 (up from $7.00)

Pivot: 200-day SMA (currently $5.60)

Add: Down to the 50-day SMA (currently $5.00)

Panic: Loss of the 50-day SMA (as that would create a head-and-shoulders pattern)

At the time of publication, Guilfoyle was long UA equity.