No-Moat Under Armour Managing Through a Tough Environment; Shares Very Attractive

Despite weakening market conditions, Under Armour’s fiscal 2023 second-quarter results were in line with our forecast and its guidance in August. Moreover, while it lowered its outlook for the second half of the year, the revision was minor and less than feared, leading investors to bid up its shares by more than 10%. Based on the results and outlook, we do not expect to make any material change to our $15.70 fair value estimate and continue to view Under Armour as very undervalued. While we view it as a no-moat firm, we think it does benefit from the growth of activewear and wide-moat Nike’s pullback in distribution, especially in footwear. Moreover, Under Armour has a solid balance sheet, closing the quarter with $180 million in net cash after essentially breaking even on operating cash flow in the first half.