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Pro Analysis

Morgan Stanley says the worst is over for plunging Under Armour shares

Kevin Plank, founder and chief executive officer of Under Armour Inc., speaks during the 2017 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Friday, Jan. 6, 2017.
Patrick T. Fallon | Bloomberg | Getty Images
Kevin Plank, founder and chief executive officer of Under Armour Inc., speaks during the 2017 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Friday, Jan. 6, 2017.

Morgan Stanley told investors Under Armour shares are now fairly valued after its recent plunge. The firm upgraded the company to equal-weight from underweight.

Under Armour shares are down 27 percent year-to-date, with most of the decline occurring after the company gave weaker-than-expected 2017 sales guidance on its Jan. 31 fourth-quarter earnings report. The shares are also down 46 percent in the previous 12 months.

"The stock now discounts more reasonable long-term assumptions. … While we see some execution risk near-term and a wide risk/reward, our view is this outlook is much more realistic than before," analyst Jay Sole wrote in a note to clients Tuesday. "We believe the Under Armour brand has sustained some damage, but overall remains solid. … We think the stock can hold its current level."