Yesterday, shares of Under Armour (UAA) surged 9.9% as investors cheered its better-than-expected earnings. Baird’s Jonathan Komp and Benjamin Bray, however, note that the Bull-Bear debate around Under Armour is far from over. And remember, this is coming from a pair of bulls.
So why do Komp and Bray warn investors not to make too much of yesterday’s big gain? I’ll let them explain:
We are encouraged that UA delivered on Q1 targets (profit upside timing-driven), but view today’s ~9% gain as a sign sentiment had moved too negative, and not that current bear arguments are resolved. We think the lowered Q2 bar probably de-risks the near-term outlook, setting up the planned 2H acceleration as a key proof point on whether UA can successfully shift its product/positioning. We are staying the course, and will seek opportunities (hopefully during 2H) to raise our conviction level.
That aligns nicely with the view of Cowen’s John Kernan, who argued that short-covering was responsible for a big chunk of yesterday’s move.
Shares of Under Armour have declined 0.3% to $21.61 at 1:57 p.m. today.
Source: Blogs Barrons Stocks To Watch
