Baird sees a 50% upside

Shares of Under Armour Inc (NYSE: UAA) have lost more than 20% in less than two months, but Baird says expect a strong rebound in the coming months.

Baird adds UAA to its list of top ideas for 2022

In a note on Tuesday, analyst Jonathan Komp lifted his rating on Under Armour to “outperform” with a price target of $32 a share that represents an about 50% upside from here. UAA is now on his list of top ideas for 2022.

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Komp is focusing on sports apparel and fitness companies with potential for cyclical earnings recovery as he doesn’t expect valuation multiples to re-rate higher this year. He wrote:

Current relative valuation multiples appear reasonable, and robust income gains and other drivers should fuel healthy spending conditions and earnings growth again in 2022E.

Last month, Wells Fargo also hailed Under Armour’s strong fundamentals as it rated the stock “overweight” with a price target of $33. The $8.19 billion company closed 2021 with a 20% gain.

Under Armour could double its EPS by 2025

Under Armour took several measures in 2021 to improve its fundamentals, including prioritising full-priced selling and increased focus on DTC (direct-to-consumer) and eCommerce. It also withdrew from 3,000 lower-margin locations in North America.

Under Armour is positioned to deliver sustained mid-to-high-single-digit annual revenue increases in F2023E, which in turn should drive significant leverage amid an improved cost base and a return to low-teens operating margin or higher.

Komp expects the sports equipment company to double its per-share earnings by 2025. Under Armour is scheduled to report its quarterly results on February 9^th. In the latest reported quarter, its EPS printed at more than double the FactSet consensus.