A couple of weeks ago I posted a turnaround thesis on Under Armour. It got a lot more attention than I expected, and while plenty of people disagreed with me, I appreciated the pushback because it made me think harder about the risks.
My original point wasn’t that Under Armour is suddenly a great company or that the turnaround is guaranteed. My argument was simply that the market might be pricing the company more pessimistically than the actual probability of a successful turnaround.
After today’s move, I wanted to revisit the discussion and see if anyone’s thinking has changed.
From a chart perspective, things are starting to look more constructive. Since the lows in May, UAA has been putting in higher lows and higher highs, reclaimed some important moving averages, and today broke into an area that’s acted as resistance for the past couple of months on noticeably stronger volume.
I know technicals don’t change the underlying business, but they can sometimes reflect changing expectations before they show up in earnings.
Fundamentally, my thesis hasn’t really changed.
Kevin Plank is back as CEO.
Management is simplifying the business by reducing SKUs.
They’re focused on improving margins rather than chasing revenue at any cost.
Inventory continues to normalize.
The brand is trying to return to a more premium performance-athletic identity.
Short interest is still elevated enough that positive execution could have an outsized effect on the stock.
I still think that’s the key question.
If Under Armour can stabilize revenue while improving margins and rebuilding pricing power, I think the market could start valuing the business differently.
If margins improve only because they’re cutting costs while revenue keeps shrinking, then maybe the stock deserves to stay cheap.
So I’m curious if today’s price action changes anyone’s opinion.
For those who were bearish on my original post:
Has anything changed for you?
What would you need to see before you’d believe the turnaround is actually gaining traction?