JPMorgan cuts Under Armour stock to underweight, slashes price target By Investing.com

On Thursday, JPMorgan delivered a bearish stance on Under Armour (NYSE:), Inc. (NYSE:UAA), downgrading the stock from Neutral to Underweight. The firm also reduced the price target from $8.00 to $6.00.

The downgrade follows Under Armour’s management forecast, which set the adjusted earnings per share (EPS) for fiscal year 2025 at $0.18 to $0.21. This projection falls significantly below the Street’s expectation of $0.59, based on anticipated revenue declines and other financial measures.

Under Armour’s management anticipates revenues to fall by low double-digits, which is more pessimistic than the Street’s projection of a 2.4% year-over-year increase.

Despite an expected improvement in gross profit margin (GPM) of 75 to 100 basis points year-over-year, surpassing the Street’s forecast of a 60 basis point increase, the company’s selling, general, and administrative expenses (SG&A) are projected to decrease by 2-4% year-over-year. This is expected to result in an approximate 2.8% EBIT margin at the midpoint, below the Street’s expectation of 6.0%.

For the near term, Under Armour’s guidance for the first quarter of fiscal year 2025 includes a projected diluted loss per share of $0.08 to $0.10, contrary to the Street’s estimate of a $0.04 gain. The company expects revenues to drop by low teens year-over-year, which is significantly below the Street’s forecast of a 0.1% decline.

Additionally, the gross margin is projected to decrease by 20 to 30 basis points year-over-year, which is less optimistic than the Street’s expectation of a 70 basis point increase.

Despite the disappointing outlook for the first quarter, Under Armour’s management anticipates revenue growth to sequentially improve from the second to the fourth quarter, with declines expected to be in the high single digits, an improvement over the first quarter’s low teens decline.

The company also expects gross margin expansion to improve, with a planned increase of 120 basis points year-over-year in the second to fourth quarters. This is anticipated to be a significant improvement over the first quarter’s decline, with management citing healthier full-price selling compared to the promotional headwinds experienced over the past two years.

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