Athletic apparel retailer Under Armour (Ticker Symbol: UA) reported mixed results on its most recent quarterly earnings and revenue release. The Baltimore, Maryland based company reported a slight earnings per share miss of .04 cents per share vs. Wall Street analysts’ expectations of .05 cents per share. Additionally, Under Armour slight reported a revenue miss coming in at $1.192 billion vs. Wall Street analysts’ expectations of $1.199 billion. The company did note that while footwear sales were up 4.7%, apparel sales were down 1.1% for the quarter.
Under Armour’s domestic sales were down 3.2% for the quarter, while its international sales increased by 12%. The company’s international unit now accounts for over 27% of Under Armour’s total revenue. Under Armour left its earnings guidance for the fiscal year unchanged at .33 to .34 cents per share, which is slightly lower than analysts’ estimates at .35 cents per share. The company has had a large inventory glut since 2018 and have since dropped inventories down 26% to $966 million.
Under Armour’s stock has been under pressure over the past three years. Two very negative earnings and guidance reports sent the stock gapping sharply lower, trading below both its 50 and 200-day Moving Averages in the fourth quarter of 2017 and the first quarter of 2018. The stock continued to trade lower throughout the remainder of 2018 forming an Inverse Head and Shoulders reversal pattern, as indicated on the charts by the green lines. Traders and investors sometimes look at Inverse Head and Shoulders patterns for a possible pause within the current trend which can potentially lead to a reversal.
Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Under Armour’s case, one would take the bottom price from the head of the pattern (roughly $11.00) and the price of the neckline from the pattern (roughly $24.00) then subtract them to get the difference. ($13.00) The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move: Neckline – Difference = Measured Move. In Under Armour’s case, the projected price target from the Inverse Head and Shoulders pattern would be roughly $37.00. The stock is currently up over 30% on the year and bouncing off of its 200-day Moving Average.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 10 analysts offering 12-month price targets, the average price target for Under Armour’s stock is $26.00. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $21.01.
Under Armour’s North American sales have been weak and much of its profits are coming from overseas, but the company is taking steps to build up its domestic sales. Chart watchers should be watching the Head and shoulders pattern for a neckline breakout opportunity above $24.00. Investors in the athletic apparel space should look forward to competitor Nike’s (Ticker Symbol: NKE) earnings release on September 24th for fresh news within the sector.