Under Armour Inc (NYSE:UA) stock had a pretty good run in the past several years, but things started going south after last September. From its September high to its January low, Under Armour stock lost a staggering 40%.
Recently, the stock started climbing up again. Could this be a reversal of the bearish trend?
Short Term: Major Resistance Ahead for Under Armour Stock
In the short term, there are strong levels of resistance ahead for Under Armour stock. The first one comes from Fibonacci retracements, which have been amazingly accurate when it comes to identifying levels of support and resistance, especially after a major move.
Chart courtesy of www.StockCharts.com
Here’s how it works: you draw a trendline between two extreme points and then divide the vertical distance by the key Fibonacci ratios. In Under Armour’s case, we can see that the 50% retracement level has become a major resistance. UA stock reached that level three times in 2016 but never managed to break above it completely. Right now, the stock trades at $83.01 per share, not far from the 50% retracement level, which it touched a few days ago.
Other than Fibonacci ratios, Under Armour stock also has to tackle the 200-day moving average (MA). The 200-day MA has almost been flat since entering 2016 and now stands at $88.23, which is just a few dollars above UA’s current stock price.
Some might argue that there is an ascending triangle in Under Armour’s stock chart. At first glance, it seems to be true. But if you look closer, you’ll see that in recent weeks, the stock has not been able to produce higher lows.
Of course, technical details won’t be the whole story. In the long run, there are many catalysts that could send Under Armour stock back to its glory days again.
Long Term: Bright Outlook for Under Armour Stock
Let’s not forget that despite its recent downturn, Under Armour stock still skyrocketed a mind-boggling 404% in the past five years. And it’s not even a tech company!
The key to UA stock’s success is obvious—growth. The company didn’t come to existence until 20 years ago. Back then, Nike, Adidas, and Reebok were the go-to choices when consumers wanted to purchase gym clothes and running shoes.
Not anymore. Last January, The Wall Street Journal reported that Under Armour had overtaken Adidas to become the second-largest sportswear company in the U.S. by market share. (Source: “Under Armour Overtakes Adidas in U.S. Sportswear Market,” The Wall Street Journal, January 8, 2015.)
Even in the fourth quarter of 2015, which is when UA stock went into a freefall, growth was still phenomenal. The company increased its net revenue by 31% year-over-year to $1.17 billion. Diluted earnings per share (EPS) surged 19% year-over-year to $0.48. (Source: “Under Armour Reports Fourth Quarter Net Revenues Growth of 31% and Full Year Net Revenues Growth of 28%,” Under Armour Inc, January 28, 2016.)
Going forward, strong growth is expected to continue. For 2016, the company projects net revenue to grow 25% to $4.95 billion and operating income to grow 23% to $503 million.
Under Armour has also entered the wearable tech industry. At this year’s Consumer Electronics Show (CES) in Las Vegas, the company launched “UA HealthBox”—a portfolio of connected fitness products.
Inside UA HealthBox you’ll find “UA Band,” a fitness tracker; “UA Scale,” a Bluetooth and WiFi-enabled scale that also measures body fat; and “UA Heart Rate,” a heart rate sensor. The box retails at $400.00, but the company also allows consumers to buy each of these products individually.
The Bottom Line on Under Armour Stock
There you have it. Under Armour stock might have to fight off some resistance levels in the short run. But in the long run, the company’s outlook is still bright.