Under Armour has crashed 75% from its highs - here's the bull case
- Under Armour plummeted 17% after releasing disappointing earnings results on Tuesday.
- The company's stock has crashed 75% from its September 2015 highs
- Jefferies says limited competition, better positioning and global opportunities all could help Under Armour's future.
- See Under Armour's live stock price here.
Under Armor is getting smoked after its third-quarter earnings report, trading down 17.7% on Tuesday.
One analyst is staying bullish on the company's future despite shares crashing more than 75% from their September 2015 highs.
"Let's think this through," Jefferies analyst Randal Konik said in a note to clients. "[It's] a cyclical issue not a secular one."
Konik makes the argument that Under Armour is simply in a down cycle right now and that it will eventually bounce back. In March, Konik upgraded Under Armour to a "buy" suggesting that the coming Curry 4 sneakers and relatively low backlogged inventories would place it in a good position to rally through the rest of the year. The stock has dropped nearly 31% since, but Konik is standing his ground.
"We see this as being early and not being wrong," Konik said.
Under Armour, as well as its main rivals, Adidas and Nike, are head-deep in the ongoing retail apocalypse. Luckily for Under Armour, it is in the best position to pivot from brick-and-mortar stores to online because of its low inventory in stores which makes it easier for the company to pivot, Konik said.
Additionally, Most of Under Armour's business, about 80% of sales, are in the US right now. That represents a huge growth opportunity for the company, Konik says. Nike and Adidas currently address more of the total global market, which means they have less room to grow their customer bases there, according to Konik.
After the poor earnings results, Konik lowered his price target to $24 from $28, but he still rates the company a "buy."
"The long-term revenue opportunity is large and margins should rebound towards historical levels with time…it will just take more time than we thought," Konik said.
