JP Morgan has raised its price target to $30 on Under Armour. Should I invest?

Under Armour, Inc. (NYSE: UAA) shares have advanced more than 10% since the beginning of August 2021, and the current share price stands around $24. Under Armour reported better than expected second-quarter results this month, and JPMorgan assigned a price target of $30 on these company shares.

Fundamental analysis: Under Armour’s valuation is not cheap

Under Armour is an American sports equipment company that manufactures footwear, sports and casual apparel, and despite the pandemic environment, this company’s business is going well. Under Armour reported second-quarter results at the beginning of the month; total revenue has increased by 90.8% Y/Y to $1.35 billion, while the GAAP EPS was $0.13 (beats by $0.10).

Revenue in North America rose 101% to $905 million, while the international business increased 100% to $446 million. It is also important to mention that footwear revenue rose 85% to $343 million, apparel revenue increased 105% to $874 million and accessories revenue rose 99% to $112 million.

For the 2021 fiscal year, Under Armour expects total revenue to be in the low twenties percentage range while the adjusted earnings per share should be between $0.50 – $0.52 (consensus is – $0.33 per share). JPMorgan assigned a price target of $30 on Under Armour after second-quarter results as the company continues to make improvements across product, marketing, and financial results.

Piper Sandler continues to keep a buy rating on Under Armour with a price target of $31, while the research company BTIG assigned a sell rating on the thought that UA’s second quarter could have been better.

“From our perspective, the key negative was e-commerce contraction of -18%, which in our view is not an indicator of brand strength. In fact, stronger brands have held e-commerce gains as stores have opened this earnings season. We think the issue is tough to mask comparisons from last year that only get tougher into the back half and more broadly stale innovation,” said BTIG analyst Camilo Lyon.

Under Armour trades at more than sixteen times TTM EBITDA, the book value per share is around $4, and fundamentally looking, UA’s valuation is certainly not cheap. Technically looking, Under Armour shares could advance above the current price levels in September 2021, but the risk/reward ratio is not good for long-term investors.

Technical analysis: $20 represents the current support level

Data source: tradingview.com

The current support level stands around $20; $28 and $30 represent the current resistance levels. If the price jumps above $28 resistance, it would be a signal to trade Under Armour shares, and the next target could be around $30.

On the other side, if the price falls below $20, it would be a strong “sell” signal, and the next target could be around $18.

Summary

Under Armour’s business is going well; the company reported better than expected second-quarter results this month, and JPMorgan assigned a price target of $30 on these company shares. Technically looking, Under Armour shares could advance above the current price levels in September 2021, but the risk/reward ratio is not good for long-term investors.

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