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Under Armour shares jump after upgrade by Deutsche Bank amid 'rapidly growing' overseas business

Key Points
  • Analyst Paul Trussell upgrades shares of Under Armour to hold from sell, based on its "rapidly growing" overseas business.
  • "The opportunity to grow internationally on the top-line remains robust as Under Armour's peers in the athletic space continue to produce outsized growth," he writes.
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Under Armour shares jumped Monday after an upgrade by Deutsche Bank, which cited its "robust" international growth.

Shares of the sportswear retailer closed up 3.91 percent following the analyst's note.

Analyst Paul Trussell upgraded shares of Under Armour to hold from sell, arguing that its "rapidly growing" international business could help balance sluggish sales in North America.

"First-quarter and fiscal year 2018 earnings are attainable in our view, reflecting improved sell-through of new products and a commitment to cost reduction," Trussell wrote in a note to clients Monday. "While North American wholesale trends continue to face pressure, new accounts partially offset and we believe international growth remains robust as we note Under Armour's peers in the athletic space recently produced outsized growth overseas, particularly in China."

The Chinese government's new investment in physical education, athletic facilities and sports leagues should jump-start the country's athletic apparel market, the analyst said.

"We believe the opportunity to grow internationally on the top-line remains robust as Under Armour's peers in the athletic space continue to produce outsized growth. Many in our athletic coverage (Lululemon, Under Armour, and Nike) have called out international as a main component of growth, particularly driven by China."

The analyst increased his price target to $16 from $13, implying little change from Friday's closing price of $16.10 over the next 12 months.

Trussell's first-quarter earnings per share estimate of negative 6 cents is a penny short of Wall Street expectations, according to FactSet data, while his 2019 year-end forecast of positive 34 cents is better than consensus.

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