Apple Inc. and Under Armour Inc Get Caution Flags from Oppenheimer

As the peak of earnings season continues, Oppenheimer analysts are weighing in on tech giant Apple Inc.(NASDAQ:AAPL) and athletic apparel giant Under Armour Inc (NYSE:UAA), with cautious ratings and views.

Apple Inc.

Apple shares are rising nearly 5% in Wednesday’s trading session, after the company reported fiscal third-quarter results with revenue above consensus estimates due to slightly better iPhone sales and much better than expected iPad sales. In addition, September quarter guidance was better than investors feared given concerns of potential delays in shipping new iPhone products.

However, Oppenheimer analyst Andrew Uerkwitz our concerns regarding its overall gross margin and its ability to recover share in China remain unanswered.

Uerkwitz stated, “Given that very little information regarding the next iPhone release (date/magnitude) can be inferred from the June call, we believe investors will stay put. The debate over potential margin compression and share improvement in China will likely last for another 6 months or longer.”

“The best question on the call focused on WeChat’s impact on Apple’s China business. Management do not see WeChat as a risk, rather, they believe WeChat help users switch to iPhone due to low iOS share in China. We see flaws in management’s argument and we believe popularity of WeChat is why Apple’s share in China stays capped,” Uerkwitz added.

As such, Uerkwitz reiterates a Perform rating on Apple shares, while no price target was provided. (To watch Uerkwitz’s track record, click here)

Out of the 34 analysts polled in the past 3 months, 26 are bullish on Apple stock, while 8 remain sidelined. With a return potential of nearly 7%, the stock’s consensus target price stands at $167.90.

Under Armour Inc

Under Armour shares fell nearly 9% yesterday after the sportswear maker reduced its full year outlook on both sales and gross margin. This reduction is based on both the restructuring plan as well as the choppy NA athletic environment. To the company’s credit, second-quarter revenue of $1.088 billion topped Street’s expectations of $1.077 billion.

Emphasizing increased conviction in her Perform rating, Oppenheimer analyst Anna Andreeva noted: “From a growth company trading at premium valuation, UAA is now playing defense with restructuring (facility & lease terminations, severance, inventory charges) as top line slows (second time ’17 revenue expectations were lowered), while valuation is actually expanding (stock trading at >60x our low-on-the-Street ’18 est.). Footwear (growth vehicle at just 22% of sales) turned negative in 2Q17, first time in recent history, while North America (~76% of sales) is flat to down slightly; UAA took down gross margin expectations (down 120 bps for the year, from down slightly previously) while revenue reset is more muted (now even bigger hockey stick in 4Q17), suggesting another reduction possible ahead.” (To watch Andreeva’s track record, click here)

Out of the seven analysts polled by TipRanks (in the past 12 months), one rated Under Armour stock a Buy, 5 rated the stock a Hold and 1 recommended a Sell. With a return potential of 9%, the stock’s consensus target price stands at $19.60.


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