Under Armour (UA): Bearish Signals Point to Put Option Opportunities

Under Armour develops, markets, and distributes branded performance apparel, footwear, and accessories for men, women, and youth globally. Its products are engineered for various climates and athletic activities, targeting athletes from youth to professional levels, as well as consumers with active lifestyles. The company's apparel incorporates innovations such as 'COLDGEAR', 'HEATGEAR', and 'UA STORM'. Footwear includes technologies like 'Charged Cushioning', 'UA Flow', and 'HOVR'. Under Armour distributes its products through wholesale channels (sporting goods chains, retailers), direct-to-consumer channels (Brand and Factory House stores, e-commerce), and licensing arrangements. The company differentiates itself by emphasizing product performance and innovation, building brand awareness through sports marketing (outfitting agreements, sponsorships), and focusing on retail presentation to enhance brand experience.

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UA's technical outlook is decidedly bearish. The stock has been in a clear downtrend over the past 90 days, declining from approximately $6.60 at the end of June to $4.31 as of November 4th. The price is currently trading well below its 50-day SMA (4.75) and 200-day SMA (5.85), confirming the downtrend. Momentum indicators also signal weakness. The RSI_14 is at 34.74, indicating oversold conditions, but not at levels suggesting an imminent reversal. The MACD_12_26_9 is negative (-0.107), and the MACDh_12_26_9 is also negative (-0.0158), demonstrating bearish momentum. The Stochastic Oscillator (STOCHk_14_3_3) is at 17.87, also suggesting oversold conditions, but again, without signs of upward reversal. The ADX_14 is at 15.52, indicating a weak trend, but the recent price action confirms the trend is downward. Overall, the technical indicators suggest continued downward pressure on UA's stock price in the short to medium term.

The company's MD&A presents a mixed picture. `Net revenues` decreased by 4.2%, totaling $1,134,068 compared to $1,183,665 in the same period last year, indicating a slowdown in sales. The `gross profit` margin increased slightly to 48.2% from 47.5%, driven by foreign exchange and product mix benefits, but offset by channel mix and supply chain issues. The company is undergoing a '2025 restructuring plan' expected to cost between $140 million and $160 million. The company also anticipates a negative impact of approximately '$100 million to our cost of goods sold in Fiscal 2026 attributable to incremental tariff rates, which is expected to impact gross profit by approximately 200 basis points'. Operating activities provided $48,852 in cash flow, a significant decrease from $152,975 in the prior year, driven by changes in working capital. The company issued $400 million in 'Senior Notes due 2030', and intends to use the net proceeds along with borrowings and cash to redeem the 'Senior Notes due 2026'. Management acknowledges 'challenging market conditions' and is actively monitoring the 'evolving global trade environment' and macroeconomic factors, like 'inflationary pressures and fluctuations in foreign currency exchange rates'. The company is also focused on 'driving premium brand-right growth and delivering improved profitability', but faces headwinds from lower consumer demand and global economic uncertainties.

Under Armour's Q1 2026 earnings call reveals a company in the midst of a significant brand transformation facing considerable headwinds. While management expresses optimism about the long-term direction, the near-term outlook is undeniably challenged. CEO Kevin Plank acknowledges that the company's profitability is 'projected to be about half of what it was last year' due to approximately '$100 million in additional tariff-related costs, along with softer-than-expected demand.' CFO Dave Bergman further detailed that Q2 revenue is expected to decline 6% to 7% year-over-year, with a 'low double-digit decline' anticipated in North America due to 'continued weakness in our wholesale business.' Gross margin is also projected to decline significantly, by 340 to 360 basis points, driven primarily by 'approximately 300 basis points of decline from higher product costs, of which about 2/3 relates to new tariff costs.' While there are some positive signals, such as improved brand health metrics and growing excitement around new product launches, the magnitude of the financial challenges suggests continued pressure on the stock in the short to medium term. Plank's statement that 'none of this is ideal. We don't like this,' encapsulates the somber tone surrounding the company's immediate prospects, despite ongoing efforts to strengthen the brand and increase average selling prices.

UA's financial performance presents a mixed picture with some concerning trends. Revenue has fluctuated, starting at $1,332.1M in Q4 2024 and ending at $1,134.1M in Q1 2026. The gross profit ratio has also seen volatility, peaking at 0.498 in Q2 2025 before declining to 0.482 in the most recent quarter. Operating cash flow has been inconsistent, swinging from -$321.4M in Q2 2025 to $48.9M in Q1 2026, indicating potential challenges in consistently generating cash from operations. Furthermore, total debt has increased significantly from $595.4M in Q1 2025 to $1,675.7M in Q1 2026, suggesting a substantial increase in leverage. The company reported a net loss of $2.6M in the latest quarter, which is a slight improvement from the larger losses seen earlier in the period but still a point of concern. Given the inconsistent cash flow, increasing debt, and fluctuating profitability, the company's near-term financial health appears uncertain.

The company presents a moderately bullish investment profile based on its key metrics and financial ratios. Revenue has shown positive growth, indicating a healthy demand for its products or services. The gross margin has remained relatively stable, suggesting efficient cost management. The Return on Equity (ROE) indicates a solid return for shareholders. The Price-to-Earnings (P/E) ratio suggests the company is appropriately valued by the market. The debt-to-equity ratio has seen a decrease, showcasing the company's improved financial leverage. The current ratio signifies the company's strong ability to meet its short-term obligations. Overall, the company demonstrates a stable and growing business model with a healthy balance sheet, making it a moderately attractive investment for the next 6-12 months.