Under Armour (UA) Extends Rally After Analyst Upgrade

Under Armour, Inc. (UA) shares rose 2% during Wednesday's session after Argus upgraded the stock to Buy with a price target of $20.00 per share.

Key Takeaways

  • Under Armour shares rose after Argus upgraded the stock to Buy with a $20.00 price target, citing the prospects for an earnings recovery.
  • The move follows comments from several other analysts that believe earnings could be poised to recover and that activists could become involved in the stock.
  • Traders could see the stock consolidate within its price channel in the near term before it resumes its trend higher over the coming sessions.

Argus analyst Josh Brownstein believes that demand for performance apparel, footwear, and accessories has been improving while Under Armour management has been keeping a close watch on costs. Brownstein believes that the company's current valuation of 10X FY 2022 earnings per share (EPS) is below the average of other apparel names in the analyst's coverage.

A price channel appears on a chart when a security's price becomes bounded between two parallel lines. Depending on the direction of the trend, the channel may be termed horizontal, ascending, or descending.

The move follows Wells Fargo's upgrade to Overweight and Gordon Haskett's speculation that activist investors could become involved in Under Armour stock.

Chart showing the share price performance of Under Armour, Inc. (UA)

From a technical standpoint, the stock broke out from reaction highs of around $14.25 and remains in a bullish price channel dating back to mid-September. The relative strength index (RSI) rose to overbought levels of 71.44, but the moving average convergence divergence (MACD) remains bullish. These indicators suggest that the stock could see some consolidation before resuming its intermediate-term trend higher.

Traders should watch for consolidation within the price channel with a high of around $15.00 and a low of around $13.00. If the stock breaks down, traders could see a move toward the 50-day moving average at $11.45 over the coming sessions. If the stock breaks out, traders could see a move to close the prior gap at around $18.00.

The Bottom Line

Under Armour shares moved higher during Wednesday's session after Argus upgraded the stock to Buy with a $20.00 price target. While analysts have been warming up to the stock, traders could see some near-term consolidation within the stock's price channel before it resumes its intermediate-term trend higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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