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Under Armour: Sentiment Turns Bearish on 2022 Outlook

Under Armour (UAA) reported stellar Q4 2021 financial results, but the company’s stock price is down on the company’s 2022 forecast and overall bearish market conditions.

Under Armour manufactures and sells athletic and outdoor under garments. Its brand has become very popular among sports teams and for people who work outdoors.

The company’s clothes are made from breathable fabrics, which allows for better body temperature control in different climates.

The company’s financial performance has been excellent for many quarters, as it consistently reports high gross margins and net operating income.

Under Armour indicated lower expectations for its 2022 revenue and growth. The company’s stock experienced a sell-off over the guidance and because of larger market volatility. For the time being, I rate the company as bearish.

Q4 2021 Financial Results

Under Armour sells its brands globally through wholesale distribution, in self owned retail outlets, and through e-commerce. The company reported $1.5 billion in revenue for Q4 2021, a 9% increase compared to last year’s same quarter.

Revenue is down only a hair from last quarter. The company reported a gross profit of $775.9 million, representing a gross margin of 50.7% on its revenues.

Apparel represents the company’s strongest sales category, bringing in $1.098 billion. Sales in Apparel showed an 18% increase from the previous year’s same quarter, followed by its Footwear segment at 17.4%. The company’s Accessories segment decreased by 26.5%.

North America is the company’s largest market and showed a 15.1% increase compared to last year’s same quarter. The company also saw a 24.2% increase in sales from its European, Middle East, and Asia markets. The company reported decline in its Asia Pacific and Latin America markets.

Under Armour reported a net income of $109.657 million, representing a 40% increase from previous year’s quarter. The company has $1.669 billion in cash and short-term investments. Its $4.9 billion in assets is far greater than its $2.9 billion in liabilities.

Bearish Outlook for 2022

The Q4 results beat expectations, but the company’s outlook for 2022 has shaken up investor sentiment. The company warns of supply chain disruptions, which will continue into 2022.

Revenues and margins are expected to be lower, while operating costs will rise. The company foresees price increases for its products.

The company’s stock price is down 3.2% over the past 12 months and 14.6% over the past three months. The overall market conditions have added to the downtrend. Reports of high inflation and other items have caused the markets to suffer extreme volatility.

There have been a lot of unexpected outcomes during the current earnings season. Under Armour is no exception.

The company reported consistent growth and profits, but its stock price dipped due to outlook and investor sentiment.

Wall Street’s Take

Turning to Wall Street, Under Armour has a Moderate Buy rating based on 12 Buys, seven Holds, and one Sell rating in the last three months. The average Under Armour price target of $25.94 implies a 49.9% upside potential.

Conclusion

Under Armour reported excellent financial results for Q4 with increasing revenues, profit margins, and net income. The company expects decreasing results for 2022 due to global shipping issues and supply chain disruptions.

Under Armour’s stock experienced a sell-off based on the lowered guidance and larger volatile market conditions. Until investor sentiment clearly changes, I rate the stock as bearish.

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