Could This Spark a Rally in Under Armour Stock?
In the past two months, Under Armour Inc (NYSE:UA) stock was traveling mostly downhill. Even after Wednesday’s impressive climb to $39.75, Under Armour stock is still down 17% since April’s high. But don’t worry—the company might be on its way to introducing the next big thing in wearable tech.
No, I’m not talking about its fitness trackers or WiFi-enabled weight scales. What Under Armour might do is something with just as much—or perhaps even bigger—potential. What is it? Connected apparel.
In an interview with Tech Insider, Under Armour’s head of innovation, Kevin Haley, said, “In 10 years at Under Armour, we’ll be making things that no one has conceived of yet.” (Source: “3 Predictions for the Future of Athletic Wear, According to Under Armour,” Tech Insider, June 29, 2016.)
Haley predicts that in the future, there will be biotech clothing. Here’s how it could work: A shirt would have a built-in temperature tracker. It could sense if you are hot or cold and change the length of its sleeves or temperature accordingly. It might even be possible to change the color of a garment with the tap of a button.
This could be a huge opportunity for companies like Under Armour. It could redefine the entire sports apparel industry.
“If you had one product that you could wear in the snow and in the blazing hot sun…so that you are always comfortable, why would you have another product?” he said. (Source: Ibid.)
The neat part is that connected apparel is different from most wearable tech in that it appeals to a much larger part of the population.
You see, fitness trackers are great, but not everyone wants one (otherwise Fitbit Inc [NYSE: FIT] stock would have shot through the roof). One of the criticisms is that if you already work out a lot, you don’t need a fitness tracker to stay active. Those that are not active might find the goal of 10,000 steps per day frustrating and quickly forget to wear it.
Smart apparel, on the other hand, could be very much different. It doesn’t matter if you work out often or not, because when you are working out, connected sports apparel would provide more comfort and convenience.
Note that sports apparel is a big part of Under Armour’s business, accounting for more than 70% of the company’s revenue. Going forward, the company is determined to focus more on technology.
“Moving toward this idea of biometric measurement, and an understanding of self, is I think, one of the waves of the future,” said Kevin Plank, founder and chief executive officer of Under Armour, earlier this year. (Source: “Under Armour CEO Sees Technology as Company Destiny,” Fortune, February 5, 2016.)
“What are we gonna do if Apple decides they’re going to make a shirt, or they’re going to make a shoe, and more importantly, why don’t we beat them to it?” he proposed. (Source: Ibid.)
Based on Plank’s remarks, it seems that Under Armour is not just doing tech as a side project. As a matter of fact, it’s investing quite heavily into the segment. In 2013, the company spent $150 million to acquire MapMyFitness Inc., which designs applications that allow athletes to track their workouts using global-positioning technology. (Source: “Under Armour Buying MapMyFitness in $150 Million Deal,” Bloomberg, November 14, 2013.) And in 2015, it spent $475 million buying nutrition-tracking platform “MyFitnessPal.” (Source: “Under Armour Acquires MyFitnessPal for $475 Million,” The Wall Street Journal, February 4, 2015.)
Those acquisitions already turned out to be fruitful. The company introduced its wearable tech offering—“UA HealthBox”—at this year’s Consumer Electronics Show (CES). It contains the “UA Band,” a fitness tracker; the “UA Scale,” a connected scale; and “UA Heart Rate,” a chest strap that tracks your heart rate when working out.
The Bottom Line on UA Stock
Today, sports apparel is a multi-billion-dollar industry. However, most products currently on the market are “non-smart” and the benefits of having connected apparel are quite obvious.
Under Armour is already a big player in the sports apparel business. If its current investments turn out to be fruitful again, it could revolutionize the entire sportswear industry. That would be the next big thing for Under Armour stock.