Several substantial developments emerged to help close out the year for Under Armour (NYSE:UAA). With the first trading day of the new year already in progress, there's plenty of good news coming out that capitalizes on these developments and gives the company a clearer path toward further gains. The latest features an improved picture from analysts, and also a possible explanation for something we saw take place toward the end of the year.
Looking Polished in Activewear
Under Armour's latest development featured Pivotal Research improving its outlook on the company from “hold” to “buy,” for a slate of reasons. The two leading reasons herein were the company's overall valuation—which has been climbing back from a sharp fall-off back around February of 2020, which featured sharp fall-offs for pretty much every company actively trading around then—and an improved overall position in the market. Improved, of course, since the arrival of the COVID-19 virus, which shut down large portions of the world's economy and in some cases continues to do so.
With some reports noting that the retail sports equipment market throughout 2020 has been seeing a recovery from the early days of COVID-19, and other reports noting that the growing work-from-home movement has improved the market for comfortable clothes, it's not surprising to see more eyes turn toward Under Armour and companies like it.
An Increasingly Comfy Stock for Analysts, Too
Even as most of working America eschews ties, dress slacks, and everything that a “Dilbert” strip ever referred to as “business dorky”, the analyst picture is looking ever-brighter for Under Armour, as our latest research suggests. While the company currently carries a consensus rating of “hold”, that rating has been improving toward “buy” for the last six months.
Six months ago, the consensus was made up of three “sell” ratings, 19 “hold”, two “buy” and one “strong buy.” Today, it's comprised of two “sell” ratings, 15 “hold”, seven “buy” and one “strong buy,” which illustrates nicely how it's developed. There were intermediary stages along the way, of course, but each has improved to the “buy” side progressively. The price target has likewise improved in that time frame, going from $11.14 six months ago to $15.25 today. With the company trading at $17.33 as of this writing, though, there's likely to be some further modifications in the future.
Building Toward Something Larger
Knowing what we know, events recently seen about the company suddenly make quite a bit of sense. Just before last year ended, we discovered that Under Armour had been the target of an increasingly large number of options trades. It wasn't immediately clear just why this was the case, but we did note that Under Armour was getting a lot of interest from the analyst sector in recent weeks. Between November 1 and December 17, Under Armour had been the topic of conversation from 15 separate analysts.
Throw in the fact that, back on December 18, Under Armour had completed the sale of its MyFitnessPal operations to Francisco Partners—a deal which brought in $345 million for the company—and that provided even more reason to pay attention to Under Armour. That particular deal had been in the works since October, and has only recently concluded.
So when we take all of these points together, and throw in a few more about the general state of affairs these days, a clearer picture emerges. We know that Under Armour has divested some operations to allow it greater focus on its core operations. We know that the demand for comfortable activewear has only improved thanks to coronavirus-related shutdowns all over and an increased appreciation of the work-from-home phenomenon. We know that Under Armour has been improving its direct-to-consumer sales operations to better access customers who may not be allowed by government mandate to enter a retail store.
Put all these together and you've got a company that's not only increasingly pandemic-proof, but also providing a product customers increasingly appreciate. While the landscape for retailers—especially clothing retailers—has been particularly grim these last few months, companies like Under Armour are still cleaning up. There are several common threads when it comes to clothiers that survive the pandemic, and Under Armour seems to have several to its credit.
The improvements Under Armour has made will go a long way toward producing better outcomes for shareholders, and given that the analyst picture has only brightened over the last six months, that should be plenty of encouragement to pick up shares for your portfolio in the new year.
Companies in This Article:
