Stifel on Tuesday moved Under Armour to a Hold from a Buy and reduced its price target to $6 from $9, saying the athletic apparel maker's turnaround appears to be taking longer than previously anticipated. The brokerage highlighted mounting pressure on profitability and a shift toward a more leveraged balance sheet as central concerns.
In its published research note, Stifel detailed downward revisions to its earnings outlook, trimming its FY27 adjusted EPS estimate to $0.12 from $0.24 and lowering FY28 expectations to $0.20 from $0.45. Those cuts followed Under Armour's fourth-quarter results for fiscal 2026, which fell short of the firm's projections.
Under Armour reported revenue for Q4 FY26 of $1.17 billion, a 0.8% decline year-over-year. Adjusted diluted EPS arrived as a loss of $0.03, missing Stifel's forecast. Gross margin deteriorated by 360 basis points to 43.1%, a contraction Stifel attributed to U.S. tariffs, elevated promotional activity, and supply chain disruptions.
Stifel pointed to the company's stepped-up investment stance, notably higher marketing tied to a premiumization strategy, as adding to the challenge of restoring sustainable earnings growth. The brokerage called out planned low-single-digit SG&A growth for FY27 and an incremental $30 million in marketing spend as particular drivers that raise the bar for near-term margin improvement.
Under Armour's own FY27 guidance added to the cautious tone. Management expects annual revenue to decline slightly and projected adjusted EPS in a range between $0.08 and $0.12, figures that sit below prior analyst expectations. The company also forecast North America sales to fall in the low-single digits, citing softer wholesale demand and a cautious retail environment as underlying factors.
On the balance sheet, Stifel flagged a deterioration in the firm's financial profile. Total debt rose to $1.19 billion and the company moved from a net cash position to net debt, a shift the brokerage views as reducing financial flexibility.
While Stifel acknowledged that Under Armour remains a credible global athletic brand with strong recognition, the firm said visibility into meaningful revenue acceleration is limited amid intense competition and slowing international growth trends. Taken together, these elements prompted the rating downgrade and lower valuation assumptions.
Analyst context - The note emphasizes that higher operating expense commitments and additional marketing investment linked to premium positioning increase the hurdle for achieving the earnings recovery Stifel had previously modeled. The combination of narrower gross margins and planned SG&A increases are central to the recalibration of estimates.