Jefferies Is Optimistic On Under Armour Long-Term, But...There's A Big 'But'

In a report published Wednesday, Jefferies analyst Randal Konik reiterated a Hold rating and $73 price target on shares of Under Armour Inc (NYSE: UA) following investor meetings with the company's management team.

Here are Konik's takeaways from the meeting:

Footwear: Under Armour continues to expand into the specialty mall channel through deeper penetration in SKU count and through door expansion. The basketball shoe category provides an "important voice" for the brand to drive consumer engagement and cross-selling to other categories.

Related Link: Citigroup's Annual Basketball Footwear Survey In 10 Charts

International Expansion: Under Armour's international traffic to its website is "coming in hot" and higher traffic levels at new international retail locations "indicate a thirst" for the brand. Although its international business is still in its early stages, the trajectory is "promising."

Connected Fitness: Under Armour's acquisition of Endomondo and MyFitnessPal ensured it is the world's largest digital health and fitness community with over 130 million users. The plan is to "utilize the platforms as a vehicle to first connect to e-commerce and ultimately thread into retail."

The move into the digital space is "wise" as a method to tap its user base that includes a sizable international representation and large amounts of female users.

Bottom Line: Under Armour is a "well-managed" company benefiting from strong secular tailwinds. However, Konik noted that shares are trading at a "very stretched" valuation with few catalysts on the horizon to move the stock higher.

However, the analyst remains "very optimistic" on the long-term prospects for the brand and investors should buy shares on any sizable pullback.