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Wall Street JournalUnder Armour Gains 28% in 3 Months: How Should Investors Play Ahead?
Under Armour, Inc. UAA shares have gained 27.6% in the past three months, surpassing the industry peers and the broader S&P 500 index’s growth of 6.6% and 2.6%, respectively. This impressive performance can be attributed to a combination of factors, including product innovation, a growing direct-to-consumer (DTC) business, international expansion and improved operational efficiency.
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The company's renewed focus on delivering high-quality athletic wear, coupled with aggressive marketing campaigns, has enhanced its appeal in the competitive sportswear market. This, in turn, is driving stronger consumer engagement.
UAA stock last traded at $8.31 before closing Friday’s session and is hovering near its 52-week high of $9.50, touched on Dec. 20, 2023. The stock is trading above its 50 and 200-day moving averages, which indicates robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in UAA’s financial health and prospects.
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Let us take a deeper dive into Under Armour's fundamentals, market position and prospects to assess the optimal course of action for investors and understand why this stock is attracting investors.
Decoding Tailwinds Behind UAA Stock’s Momentum
Under Armour is enhancing its DTC business by expanding the company’s online presence and optimizing retail strategies. By focusing more on selling directly to customers, the company can boost profit margins. This approach also helps Under Armour build stronger connections with its customers, leading to more loyalty and repeat business. Also, the introduction of its full-price Brand House concept has delivered promising early results, driving increased productivity and higher revenue per visitor.
The company’s “Protect This House” initiative is designed to strengthen its market presence through a focus on key priorities. It aims to ignite global brand appeal by implementing innovative marketing strategies that resonate with consumers. Additionally, the initiative emphasizes superior design and product quality, ensuring that Under Armour products meet the high expectations of athletes and fitness enthusiasts. The company is committed to driving growth in the U.S. market, aiming to capture a larger share of this crucial segment.
UAA is streamlining product offerings by reducing its Stock Keeping Unit count by 25%. This reduction is not a blanket strategy but a targeted effort to focus on areas with the highest returns, both financially and strategically. The company is prioritizing its better and best-level products, which align with its goal to elevate the brand’s market positioning.
Under Armour's UA Rewards loyalty program has achieved rapid growth, with nearly five million members within its first year in North America. This program significantly contributes to revenues, with approximately 60% of North American direct-to-consumer revenues now coming from UA Rewards members. The program's success is evident in higher revenue per consumer and increased repurchase rates.
Under Armour's disciplined cost management and operational streamlining have positively impacted its profitability. Recent quarterly reports have shown a notable improvement in gross margins, which reflects the company's successful efforts to control expenses while maintaining product quality. This focus on cost efficiency has allowed Under Armour to enhance its bottom line, making the stock more attractive to growth-focused investors. In the first quarter of fiscal 2025, the company’s gross margin increased 110 basis points to 47.5%. This improvement was driven due to lower levels of discounting and promotions, supply-chain benefits and lower freight costs.
Under Armour Stock Valuation
From a valuation perspective, Under Armour looks stretched. UAA’s forward 12-month price-to-earnings ratio stands at 30.83X, higher than the industry’s ratio of 13.05X. The company’s emphasis on product innovation, DTC expansion and efficient operations justifies this premium. UAA’s Value Score of B further underscores its attractiveness as an investment.
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UAA’s Investment Analysis
Under Armour's impressive stock performance, supported by favorable technical indicators, reflects market confidence in its growth and innovation. As UAA effectively strengthens its DTC business while prioritizing digitization, cost savings and product innovation, it has emerged as an attractive choice for investors. Currently, Under Armour sports a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks to Consider
Here, we have highlighted three other top-ranked stocks, namely G-III Apparel Group, Ltd. GIII, Revolve Group, Inc. RVLV and Crocs, Inc. CROX.
G-III Apparel designs, sources and markets women's and men's apparel in the United States and internationally. It currently flaunts a Zacks Rank #1.
GIII has a trailing four-quarter earnings surprise of nearly 118.2%, on average. The Zacks Consensus Estimate for G-III Apparel’s current quarter’s sales indicate growth of 3.3% from the year-ago reported number.
Revolve Group operates as an online fashion retailer for millennial and Generation Z consumers in the United States and internationally. RVLV presently sports a Zacks Rank #1. RVLV has a trailing four-quarter earnings surprise of 63.1%, on average.
The Zacks Consensus Estimate for Revolve Group’s current financial year’s sales and earnings implies growth of 2.2% and 44.7%, respectively, from the year-ago reported numbers.
Crocs together with its subsidiaries, designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories for men, women and children under Crocs and HEYDUDE Brand in the United States and internationally. CROX currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Crocs’s current financial year’s sales and earnings suggests a rise of 4.2% and 7.1%, respectively, from the year-earlier reported figures. CROX has a trailing four-quarter earnings surprise of around 14.9%, on average.
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Crocs, Inc. (CROX): Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report
Under Armour, Inc. (UAA): Free Stock Analysis Report
Revolve Group, Inc. (RVLV): Free Stock Analysis Report