Under Armour Inc
Under Armour, Inc. (NYSE: UAA) is a marketer and distributor of branded athletic performance apparel, footwear, and accessories. It is engaged in developing, marketing, and distributing branded athletic performance apparel, footwear and accessories for men, women, and youth. It operates in four geographic segments: North America, comprising the United States and Canada; Europe, the Middle East and Africa, Asia-Pacific, and Latin America.
Recent Financial and Business Updates:
First Quarter Fiscal 2024 Review:
- Revenue Decline: In the first quarter of fiscal 2024, the company's revenue decreased by 2 percent, amounting to USD 1.3 billion, or a 1 percent decline when adjusted for currency effects. This drop was influenced by a 6 percent decrease in wholesale revenue, which reached USD 742 million, while direct-to-consumer revenue increased by 4 percent, totaling USD 544 million. The direct-to-consumer growth was primarily driven by a 6 percent increase in eCommerce revenue, which constituted 40 percent of the total direct-to-consumer business in the quarter, and a 3 percent rise in owned and operated store revenue.
- Regional Variations: North America experienced a 9 percent revenue decrease, reaching USD 827 million, while international revenue saw a 12 percent increase, totaling USD 485 million, or a 15 percent increase when adjusted for currency effects. In the international segment, revenue expanded by 10 percent in EMEA, 14 percent in Asia-Pacific, and 13 percent in Latin America, with respective currency-neutral growth rates of 11 percent, 21 percent, and 5 percent.
- Category Performance: Apparel revenue declined by 5 percent to USD 825 million, while footwear revenue increased by 5 percent to USD 364 million. Accessories revenue saw a 1 percent increase, reaching USD 98 million.
- Margin and Expenses: Gross margin decreased by 60 basis points to 46.1 percent, primarily due to higher promotions and adverse currency effects, partially offset by supply chain benefits related to lower freight expenses. Selling, general & administrative expenses decreased by 1 percent to USD 587 million.
- Financial Results: Operating income amounted to USD 21 million, with a net income of USD 9 million and diluted earnings per share of USD 0.02. Inventory increased by 38 percent, reaching USD 1.3 billion. The company maintained USD 704 million in cash and cash equivalents at the end of the quarter, with no outstanding borrowings under its USD 1.1 billion revolving credit facility.
Fiscal 2024 Outlook:
The company's fiscal 2024 outlook, as provided on May 9, 2023, remains unchanged:
- Revenue is expected to remain flat or increase slightly.
- The gross margin is anticipated to improve by 25 to 75 basis points compared to the previous year's rate of 44.9 percent, driven by supply chain benefits related to reduced freight expenses. This will be partially offset by mixed impacts related to higher off-price revenue and increased promotions in the company's direct-to-consumer business.
- Selling, general & administrative expenses are projected to remain flat or increase slightly.
- Operating income is expected to range between USD 310 million and USD 330 million.
- The effective tax rate is foreseen to be in the low twenties percentage range.
- Diluted earnings per share are anticipated to fall between USD 0.47 and USD 0.51.
- Capital expenditures are expected to be in the range of USD 250 million to USD 270 million.
Technical Observation (on the daily chart)
The Relative Strength Index (RSI), calculated over a 14-day span, stands at 43.65, signifying the likelihood of either more consolidation or a brief surge soon. Adding to this, the stock presently finds itself positioned beneath both the 21-day and 50-day Simple Moving Averages (SMA), which could function as a dynamic short-term resistance barrier. Now, the stock's price hovers around a crucial support range of USD 6.00 to USD 6.50, with an anticipation of an impending upward shift originating from these support levels. Moreover, there is an expectation that the current price is on the verge of forming a double bottom pattern, and if it manages to break past the USD 7.50 mark, it could potentially trigger a substantial upward movement.
As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to Under Armour, Inc. (NYSE: UAA) at the current market price of USD 6.73 as of November 01, 2023, at 08:45 am PDT.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
How to Read the Charts?
The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
The reference date for all price data, currency, technical indicators, support, and resistance levels is November 01, 2023. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
RSI: Relative Strength Index
USD: United States dollar
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