Analyst Note| David Swartz |
No-moat Under Armour reported a large sales decline and loss in the second quarter of 2020 due to the pandemic, but its results were not as bad as feared and its direct-to-consumer efforts showed progress. However, shares dropped about 7% as the company suggested that second-half sales may be down 20%-25%, which is a larger decline than we had anticipated. Moreover, we have concerns that Under Armour’s relatively weak brand (as compared with rivals like wide-moat Nike and narrow-moat Adidas) is making its turnaround even more difficult. We do not expect to make any material change to our per share fair value estimate on Under Armour of $11.30 and view shares as slightly undervalued.