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Under Armour, Inc. Message Board

  • capriccian capriccian Jan 13, 2008 11:32 PM Flag

    Citi upgrades UA to Buy; Tgt $65

    Source: SmithBarney

    Under Armour Inc (UA)
    We Think There Could Be a Buying Opportunity After Q4 Report �
    Upgrade from Hold to Buy; See a 52% return from current level.

    Inventories the Main Risk for Q4 � Inventories were up 102% in Q3 due to the
    co�s anticipated demand for holiday and cold weather. While much of UA�s
    product can be sold full price in future seasons because there is not a high
    degree of fashion, there is downside risk if UA doesn�t report a cleaner
    inventory position when it announces Q4 results Jan.31st.

    Channel Checks Indicate Solid Sell Throughs - Our store checks suggest that
    holiday sell-throughs were solid, with a lot of UA full price product selling at
    DKS especially in the week before Christmas. Markdowns were minimal. Other
    competitors have also indicated performance product was selling through well.

    Stock At Lowest Level in 15 Mos � We think the mkt is likely pricing in
    inventory and US consumer risk with the stock trading at levels not seen since
    Oct 2006. UA�s P/E has declined 36% since the stock peaked in Aug 2007.

    LT Thesis: Upgrading to Buy � Since there is some risk in Q4, investors could
    still capture upside after the co reports. UA is a great LT idea for 3 reasons: 1)
    the brand sells to a higher end consumer making it somewhat defensive in a
    weaker US economy, 2) there is significant growth potential from new
    categories and geographies, and 3) UA is a strong brand. Based on this, our
    estimates could be conservative as they are below historical growth rates and

    US Outlook Remains Difficult � Despite possible positive long term results,
    UA�s stock could trade in tight range because of sentiment
    in group.

    Buy/High Risk 1H
    from Hold/High Risk
    Price (11 Jan 08) US$42.65
    Target price US$65.00
    from US$66.00
    Expected share price return 52.4%
    Expected dividend yield 0.0%
    Expected total return 52.4%
    Market Cap US$2,073M

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