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Morgan Stanley Sees Balanced Risk/Reward For Under Armour

Dwight Einhorn

In a report published Monday, Morgan Stanley analyst Jay Sole reiterated an Equal-Weight rating on Under Armour (NYSE: UA).

In the report, Morgan Stanley noted, “UA is a growth story, but largely understood by the market in our view. Both consensus and we think UA can meet its 2016 20% EPS CAGR goal. Secondary category sales growth is the key debate. Even if women's athletic apparel, athletic footwear, and international revenues fall below guidance, we think UA can offset it with an extra 200 bps in men's apparel sales gains above plan. We see less risk for the stock than UA's high P/E may suggest. $190B of open market remains in front of UA, allowing the Street to remain optimistic and continue awarding UA a growth P/E even if EPS misses plan.”

Under Armour closed on Friday at $58.61.

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