Following a couple of years of steep declines, Under Amour Inc. (UAA) has surprised investors this year climbing more than 40% since the start of 2018. While the stock is still 60% below highs reached in 2015 and some analysts are skeptical of the recent rally, Stifel analyst Jim Duffy is optimistic about further gains, seeing this quarter as a “stepping stone towards stabilization” for a company whose brand’s “vitality” is still intact. Early last week, he reaffirmed his Buy rating and $27 price target, implying another 31% upside from Tuesday’s close, according to Barron’s.

 Stock/Index  YTD Performance
 Under Amour  42.8%
 S&P 500

 5.5%

 Price Target  Upside
 $27  31%

Margin Turnaround

Duffy's comments were made before the company announced that Calvin McDonald, a former executive at Sephora, will become CEO as of August 20. He is replacing the previous CEO who departed in February.

Competitive Challenges

While the return of North American sales growth will help, Under Amour should not lose sight of its international business, which is expected to be “a main component of growth, particularly driven by China,” according to Deutsche Bank. But the main challenges, on both the domestic and international front, will be those posed by the company’s rivals. (To read more, see: Under Armour to Jump on Intl. Sales: Deutsche Bank.)

Reports earlier in the year indicated that the company was losing market share in sneakers to Adidas, and in its most recent earnings report at the end of June, Nike indicated that it had already seen a “return to growth in North America,” according to CNBC. Innovation will be a critical factor in order to remain competitive with both Adidas and Nike, two of Under Armour’s larger rivals.

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