Under Armour Continues To Under Deliver

They say history repeats itself and for Under Armour (NYSE: UAA), an ugly history is repeating itself and a bad habit is forming. The company reported week Q4 earnings before the bell on Tuesday that sent shares spiraling down close to 20%. GAAP EPS saw an ugly miss on analyst expectations while revenue came in short as well with just 4% growth year on year. Management also raised concerns about the company’s ability to hit 2020 numbers with the ongoing coronavirus outbreak expected to negatively impact many parts of the business. Full-year revenue for the coming year is expected to tighten up even more.

The poor results didn’t stop CEO Patrik Frisk striking an upbeat tone with his comments. He remarked "Under Armour is an operationally better company following our transformation over the past few years, with a clearly defined and focused strategy, enhanced go-to-market process, cleaner inventories, and a stronger balance sheet. However, ongoing demand challenges and the need to drive greater efficiencies in our business requires us to further prioritize our investments to put our company in the best position possible to achieve sustainable, profitable growth over the long-term."

Share Price Doesn’t Lie

However, his claim that they’re an operationally better company than they were a few years ago isn’t backed up by their stock’s chart. Since hitting an all-time high in 2015, shares have fallen close to 70% in the years since and were trading at a new 52 week low yesterday. Tuesday’s double-digit percentage fall on the back of earnings isn’t anything new either and investors are surely going to be wondering when the company will start jumping in the other direction the day after an earnings report.

In early November, the stock fell a full 20% after dank Q3 numbers. In July, they traded off as much as 25% in the aftermath of a weak Q2 report. For a stock that’s basically traded sideways for 3 years, there’s little light to inspire investors with right now, and it had all seemed so bright not too long ago.

Having IPO’d in 2005, shares really started taking off at the start of the last decade. They logged an 850% rally from mid-2010 to mid-2015 before the bubble burst and the train came off the tracks. An inability to remain competitive with the likes of Nike (NYSE: NKE) and Adidas in the sports apparel space coupled with controversies such as a federal investigation into their accounting practices made them a toxic name for many investors. It says everything that while Under Armour’s stock is down almost 70% from August 2015 levels, Nike’s stock is up over 80%.

Big Hills Ahead

They missed a trick with the athleisure boom too. Lululemon’s (NYSE: LULU) stock is up 295% over the same time frame while Under Armour is struggling to simply remain relevant. With headwinds like the coronavirus and the threat of tariffs on imported goods from China hanging over the space, as companies go, Under Armour is far from the best positioned athletic apparel name to weather the storm.

Frisk, the CEO, only came on board last quarter so is still relatively new and leeway could be given to him but he’ll need to start showing results fast. Technically, shares are trading right around the low from the December 2018 selloff. Shares were also snapped up there last November so were they to fall under that level this time, things could get ugly. The stock’s RSI is only just under 40 so there’s plenty of room for it to fall before it starts to look a little oversold.

There’s long term support waiting around the $12 mark and the stock could expect to find buyers here if it’s allowed to fall the $5 currently in the way.