CFRA analysts downgraded Under Armour (NYSE:UAA) from Hold to Sell, setting a new price target of $5.00, down from the previous $7.00.

The analysts explained the reduction in the 12-month price target, now based on a 10.0x multiple of the fiscal 2024 EPS estimate, is significantly lower compared to competitors Nike and Lululemon. This adjustment reflects concerns over Under Armour’s operational challenges and excessive inventory levels. The 2024 EPS estimate remains at $0.50, but the 2025 estimate is reduced by $0.05 to $0.50.

The analysts raised concerns about Under Armour’s investment strategy, suggesting the company isn’t reinvesting sufficiently to improve operations, instead opting to buy back shares. The analysts noted that Under Armour has struggled to generate consistent free cash flow over the past two years, arguing that prioritizing cash flow should take precedence over share repurchases.

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