Under Armour stock (NYSE: UAA)
The firm also set a December 2022 price target of $30 on the stock, which is 32% higher than its Tuesday closing price of $22.70.
On Tuesday, Under Armour reported earnings and revenue that exceeded Wall Street expectations. The retailer also increased its full-year revenue forecast.
“We see a… fundamental risk/reward scenario with 75% share price underperformance relative to the retail sector over the last 18 months,” JPMorgan analyst Matthew Boss wrote in a note.
Not only does JPMorgan believe Under Armour’s stock is undervalued in comparison to its historical performance, but the bank also sees momentum in the athletic apparel industry as a whole.
The global sportswear market is expected to grow by more than 8% between 2021 and 2025, according to the firm.
JPMorgan was also impressed with Under Armour’s execution in terms of innovation and product, which allowed the company to sell more items at full price.
Following the company’s stellar earnings report, shares of Under Armour closed 7.5 percent higher on Tuesday. In 2021, the stock is up 32%, outperforming the S&P 500.
Despite easily outperforming Wall Street earnings estimates, Amazon reported quarterly revenue that fell short of analysts’ expectations for the first time in three years. In addition, the company provided lower-than-expected third-quarter guidance.
Amazon’s stock has dropped 7.3 percent in the last week as a result of the unexpected revenue results.
′′[W]e believe this was primarily due to difficulties forecasting the effects of a return to normalized consumer shopping behavior, as well as anniversarying difficult “pandemic-inflated” results from last year,” Loop Capital’s Anthony Chukumba and Rob Sanderson wrote in a note Wednesday.
The firm reiterated its buy rating on the stock and set a 12-month price target of $3,775, which is about 12% higher than the stock’s closing price on Tuesday of $3,366.24.
According to Loop Capital, Amazon management attributed the second-quarter sales growth slowdown to a return to in-store shopping due to increased Covid vaccinations.
According to Loop Capital, Amazon leadership stated that the lower-than-expected third-quarter guidance is due in part to aggressive investments in the company’s fulfillment network and infrastructure.
Amazon’s report also provided several encouraging signals, according to the firm.
′′[W]e saw positive signs in the results (including the second and fourth consecutive quarters of sequential YoY revenue growth acceleration in AWS and advertising, respectively) and expect online store sales growth to reaccelerate as one-day delivery availability improves,” the analysts wrote.
Loop Capital examined the company’s merchandise assortment using a one-day delivery product selection tracker and discovered significant changes in availability.
Amazon shares are up 3.36 percent this year, trailing the S&P 500 and most Big Tech peers.
Chinese U.S.-listed stocks
Many Chinese stocks are in free fall as Beijing tightens its grip on industries ranging from technology to education and gaming. Tutoring companies are the latest victims of China’s ban on companies that teach school curriculums from profiting, raising capital, or going public.
Beijing may also target the online gaming industry after Chinese state media dubbed it “opium” and compared it to a drug, calling for additional restrictions to prevent addiction and other negative effects on children. Tencent and NetEase both saw their stock prices plummet on Tuesday.
Meanwhile, the Chinese government is cracking down on the flood of Chinese listings in the United States, which are overwhelmingly tech companies, as well as tightening restrictions on cross-border data flows and security.
Didi’s stock has dropped about 35% in the last month after Beijing launched a cybersecurity investigation and suspended new user registrations.
Nonetheless, there are numerous industries in China worth investing in, ranging from electric vehicles to gaming, and Beijing should ease regulatory pressures soon to ensure economic growth, according to analysts.
“Chinese authorities will likely balance their regulatory agenda against a desire for economic stability, and the intensity of the regulatory crackdown may ease amid slower growth and market volatility,” BlackRock Investment Institute head Jean Boivin wrote in a note.
EV from China
According to Deutsche Bank, the Chinese electric vehicle market is a safe haven for long-term growth following the central government’s recent regulatory crackdown.
According to the Wall Street firm, the Chinese government is making a clear push for hardware technology such as EVs, batteries, semiconductors, and aerospace, while scrutinizing the software and internet industries.
“China EV stocks could be one of the best relative safe havens for growth investors,” Deutsche Bank analysts wrote in a note. “We would expect increasing fund flows, bolstered further by Hong Kong listings and future inclusion in the SH-HK Connect mechanism.”
According to the bank, some of the market’s key players include Nio, Xpeng, and Li Auto.
“The stocks (NIO, XPEV, and LI) have all performed better than other U.S.-listed ADRs since the DIDI IPO… [we] continue to believe EV companies are operationally safe from regulatory scrutiny,” the analysts wrote.
Gaming in Macau
Another Chinese industry that would be immune to the latest round of crackdowns is gaming, which investors can bet on for a coronavirus pandemic resurgence, according to AB Bernstein.
“China wants an economically viable and politically healthy Macau, and the gaming industry helps to ensure that,” said Bernstein gaming analyst Vitaly Umansky in a note. “Gambling-related issues have been addressed for a long time and have no systemic risk implications.”
Stocks in casinos Las Vegas Sands, Wynn Resorts, and Melco Resorts & Entertainment have all dropped roughly 20% in the last month due to regulatory concerns. MGM Resorts International fell about 15% during the same time period. Umansky, on the other hand, believes the fear is exaggerated and that the gaming industry will benefit from China’s economic recovery.
“The concerns, in our opinion, are overstated, and the risk/reward trade-off today is very skewed in light of an eventual visitation and revenue recovery in Macau in the future, as well as our view on the actual risk of a regulatory crackdown in Macau,” Umansky said.
Plays for Homecoming
Beijing is reportedly considering harsh penalties for Didi, ranging from a massive fine to forced delisting following its IPO in June. Due to the risk of delisting from US exchanges, US-traded Chinese companies are seeking so-called homecoming listings in Hong Kong. Li Auto announced Monday that it intends to raise up to 15 billion Hong Kong dollars ($1.9 billion) through its Hong Kong listing.
According to JPMorgan analysts, the Hong Kong Exchanges and Clearing ADR and other Chinese brokers are one stock to buy to capitalize on the potential boom in homecoming listings.
JPMorgan said that Chinese large-cap banks are poised to benefit from the policy shift and a likely value rally.