Morgan Stanley Remains Cautious on Under Armour (UA)

(Updated - April 11, 2016 11:07 AM EDT)

Morgan Stanley reiterated an Underweight rating on Under Armour, Inc. (NYSE: UA) with a price target to $32. Analyst Jay Sole said Q1 looks solid, but he remains underweight given slowing in core US wholesale apparel, particularly women's apparel. He also has concerns about soft running footwear trends.

"UA is a growth story, but SportScan data show UA is losing apparel market share for the first time in three years. Perhaps more concerning is the decline in ASPs at an accelerating rate. These issues are particularly acute in women's apparel," said Sole.

"We also have concerns about the running footwear strategy. UA has always competed on brand image and innovation, rarely on price. Footwear sales are growing strongly, but ASPs are falling. This change in trend is a concern because it suggests a fundamental shift in the UA story," continued the analyst.

Sole added, "We see an unfavorable risk/reward. The stock has maintained a premium multiple despite downward margin revisions. However, if the market questions the UA growth story, the P/E could fall significantly. Our FY17 EPS estimate is 4% below consensus."

Morgan Stanley's bull case price target for Under Armour is $64 and its bear case price target is $21.

For an analyst ratings summary and ratings history on Under Armour, Inc. click here. For more ratings news on Under Armour, Inc. click here.

Shares of Under Armour, Inc. closed at $43.54 yesterday.

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