(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Under Armour Inc. (UAA, UA), shares have jumped by nearly 13.3% for 2018, but those gains are likely to evaporate over the coming weeks. The stock is down by almost 21% over the past 52-weeks, versus an S&P 500 that has climbed by nearly 12%. An analysis of the most recent trading patterns suggests the stocks could decline by almost 12%.
The stock failed at a critical technical resistance level now on two occasions in recent days, which suggests the stock is losing the upward momentum it had to start the year. Further, according to reports on March 29, 150 million accounts of Under Armour's MyFitnessPal app were comprised in February, which may place more negative sentiment on the stock.
A 12% Decline
The stock gapped higher in mid-February after the company reported better than expected results for the fourth quarter of 2017, with revenue coming in 4% higher than expectations. The positive news resulted in shares jumping above technical resistance at $16.75, and the stock climbing to nearly $18.50. But the stock has retraced much of those early gains and is back below support at $16.75, and has been unable to climb higher again. The gap created at $14.40 now needs to be filled, and that will likely result in the stock falling back to support around $14.40. This is a drop of about 12% from the stock closing price on March 29 of $16.35.
Analysts Cut Estimates
Despite the company recently beating revenue estimates, analysts are still lowering their forecasts for the upcoming first quarter. Since the beginning of the year, analysts have cut their views for the first quarter by 1.4% to $1.117 billion, and for the full year by nearly 1% to $5.115 billion. Analysts are not seeing much of an improvement in the company's revenue outlook. (For more, see also: Under Armour to Fall Despite Rebrand: Susquehanna.)
UAA Revenue Estimates for Current Quarter, 60 Day % Change data by YCharts
Bearish Analysts' Recommendation
Meanwhile, according to data from Ycharts, only 21% of the 34 analysts that cover the stock have a "buy" or "outperforming" rating, while 79% have a "hold" or "sell" rating. The average price target on the stock is currently at $14.65, nearly 10.5% lower than that the current price.
UAA Price Target data by YCharts
The outlook for Under Armour's stock continues to look grim, and this year's gain may be on the verge of disappearing.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.