TLDR
- UAA stock dropped 4.96% on Friday after StockNews downgraded it to “sell”
- Net income fell 99% to $1.2 million in the last quarter of 2024
- Company reported a $133.8 million net loss for the first nine months of the fiscal year
- Revenue declined 6% in the latest quarter and 8.9% over nine months
- Institutional investor Zurcher Kantonalbank increased its stake by 74.6%
Under Armour Inc. saw its stock price decline by 4.96 percent on Friday, closing at $6.70 per share. This marked the third consecutive day of losses for the athletic apparel company.
The drop came after StockNews downgraded the stock from “hold” to “sell” on Wednesday, prompting investors to sell their positions.
The company has been facing significant challenges recently, with its latest financial results showing concerning trends. Net income for the quarter ending December 2024 plunged 99 percent to just $1.2 million compared to $110.75 million in the same period a year earlier.
Net revenues also declined by 6 percent to $1.4 billion versus $1.49 billion year-on-year. The nine-month performance was even more troubling.
Under Armour swung to a net loss of $133.8 million for the first nine months of the fiscal year. This contrasts sharply with the $225 million net profit reported during the same period the previous year.
Revenue for this nine-month period declined by 8.9 percent to $3.98 billion from $4.37 billion. These results have raised concerns among investors about the company’s future prospects.
Despite the concerning financial performance, Under Armour did manage to exceed analyst expectations in its February earnings report. The company posted earnings per share of $0.08, beating the consensus estimate of $0.03.
Negative sentiment surrounding the stock
However, this positive surprise wasn’t enough to overcome the broader negative sentiment surrounding the stock. The company’s current market capitalization stands at approximately $2.89 billion.
Under Armour’s stock has been on a downward trend in recent months. The shares are now trading well below their 52-week high of $11.89, with a current 52-week low of $6.17.
The average trading price has also been declining, with the 200-day moving average at $8.39 and the 100-day moving average at $7.64. This indicates a persistent downward pressure on the stock.
Analysts have been revising their outlook on Under Armour. Multiple firms have issued downgrades or lowered their price targets in recent months.
Barclays reduced its target price from $11.00 to $8.00 and maintained an “equal weight” rating. Evercore ISI cut its target from $8.00 to $7.00 with an “underperform” rating.
Morgan Stanley reiterated an “underweight” rating with a $4.00 price target. The consensus among analysts now shows a “Hold” rating with an average price target of $9.06.
Institutional investor increases stake
Institutional investors have been making moves with the stock. Zurcher Kantonalbank Zurich Cantonalbank increased its stake by 74.6% during the fourth quarter, purchasing an additional 100,554 shares.
Other institutional investors have also adjusted their positions. FMR LLC owns over 9.6 million shares valued at approximately $86 million, while Pacer Advisors Inc. holds roughly 9.5 million shares worth about $85.5 million.
The company’s leadership has downplayed concerns about the ongoing trade tensions between the United States and China. Under Armour’s CEO has stated that Chinese tariffs on US goods have minimal impact on the business since most of its products are sourced in China.
Investors appear to remain cautious
However, investors appear to remain cautious about potential supply chain disruptions and market uncertainties related to these trade tensions. This caution is reflected in the current stock performance.
Under Armour continues to operate in the highly competitive athletic apparel market. The company offers various types of performance apparel, footwear, and accessories for men, women, and youth across multiple sports and activities.
Its product lines include running, training, basketball, cleated sports, recovery, and outdoor applications. Despite this diverse portfolio, the company has struggled to maintain its market position against competitors.
The current debt-to-equity ratio stands at 0.30, with a current ratio of 2.01 and a quick ratio of 1.19. These figures suggest that the company maintains reasonable financial leverage, though its profitability metrics are concerning.
Under Armour now faces the challenge of reversing its declining revenue trend and returning to profitability. Investors will be watching closely to see if management can implement effective strategies to address these issues in the coming quarters.
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