Under Armour is being dragged down by the weakness of its peers and has potential for a major rebound, according to BMO Capital Markets. Analyst Simeon Siegel upgraded Under Armour to outperform from sector perform, saying in a note to clients on Monday evening that investors should buy the recent dip in the stock. "The recent sell-off discounts UAA's pandemic transformation by re-focusing on profits over growth for growth's sake. ... With recent industry updates and increasingly challenging compares weighing on the sector, we believe UAA represents a healthy brand thrown out with the industry bathwater," Siegel wrote. Under Armour has had a rough start to 2022, with shares falling 11% in the past two weeks. The stock rose 0.75% in premarket trading Monday. However, the company's recent margin improvement and strong balance sheet make it a good candidate to outperform its peers, BMO said. "UA has been quietly building a strong cash balance. Interestingly, UA has been one of only a very few share-count growers in our coverage. ... With increasing coffers, repurchasing stock with excess cash could hypothetically drive > 10% [earnings per share] growth," the analyst said. BMO moved its price target up by $2 per share to $25. That represents upside of more than 32% from where the stock closed on Friday. -CNBC's Michael Bloom contributed to this report.
An Under Armour shoe is seen inside of a store on November 03, 2021 in Houston, Texas.
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Under Armour is being dragged down by the weakness of its peers and has potential for a major rebound,