Under Armour Inc Gets a Boost from New Line
Under Armour Inc (NYSE:UA) combines technology and fashion. It’s a company on the edge of the new trend of wearable technology. The premise has proven successful so far, given that Under Armour stock made its Wall Street debut in November 2005 at $5.00 per share, and now it’s trading 590% higher. Analysts see even more upside.
Canaccord Genuity Group Inc (TSE:CF) recently reiterated a “buy” recommendation for Under Armour stock. Admittedly, 2016 has not been kind to the company. UA shareholders have been on a “hold-and-see” position in the face of few new developments. Whether in the tech or fashion sectors, innovation is key to grabbing market attention.
Under Armour, the sports brand, has thrown its doors wide open to the fashion world. That’s the reason why expectations are high. The company was founded in 1996, and in 2015, UA achieved $3.96 billion in revenue. But here’s the clincher. That revenue figure means UA, in a relatively brief period, has managed to beat Adidas AG, a brand synonymous with major Olympic records and soccer World Cups, in the U.S. market.
Under Armour Still Has the Vigor of Youth
The UA brand has shown itself to be ever eager to seek new avenues of growth. It has chosen not to simply rely on sports equipment, which would have been a mistake. Now UA has spawned a fashion offshoot, “Under Armour Sportswear” (UAS), on the world stage that is New York Fashion Week.
Sportswear, sometimes called “athleisure,” is fashionable, and almost every major sports equipment manufacturer is rushing into the breach to expand its market. For example, Nike Inc. (NYSE:NKE) released a collection this past summer, with Givenchy’s star designer, Riccardo Tisci. Another designer, Alexander Wang, who is well-seasoned in the runways of New York, Paris and Milan, unveiled a collection of designs in partnership with Adidas.
But these collections, oddly, remained too close to the sports world. Under Armour has taken a more radical—read: different—approach. It aspires to reflect the Ralph Lauren Corp (NYSE:RL) or “Ivy League” style in some ways. Under Armour has gone back to the roots of American style. Therein is the key to its success in markets where the very concept of America itself is an aspiration, such as China.
UA stock has much to gain from the company’s big push into China, with 200 new stores over the next two years. UA expects to generate over a billion dollars a year in China at first, while the potential is far higher. (Source: “Under Armour ups its pace in China,” South China Morning Post, September 16, 2016.)
New Product Line Appeals to Old and New Under Armour Customers
But Under Armour has not forgotten its now-established clientele. The new lineup will also appeal to existing customers of the brand. One way to look at Under Armour now, and what it’s becoming, is as if a major smartphone company were to combine with a Nike or a New Balance Athletics, Inc. to make “smartpants” or “smartshoes.” That’s literally what Under Armour is doing, and it is literally the clothing of the future.
Under Armour has grown considerably, and in a short time. But it has yet to reach its full potential; that’s what makes UA stock appealing. The company started modestly, serving at first a niche market through high-end retailers like Barneys New York, Inc and Mr Porter, as well as on online social networks.
The company has taken off quickly, however, riding the wave pioneered by brands like Lululemon Athletica inc. (NASDAQ:LULU). Indeed, UA stock can gain from the fact that its latest collection, combining style and fashion with technology, brings it closer to the successful Lululemon strategy. Expectations are that UA stock could grow by anywhere from 30% to 50%, which is $50.00 to $65.00 over the next year. (Source: “Under Armour Inc,” CNN Money, last accessed September 16, 2016.)
Now might be a good time to consider UA stock. Under Armour has just unveiled a new sports fashion collection designed to complement its more technical range of clothing. Analysts were both surprised and impressed. I, for one, see this collection as including the kinds of items that can appeal to a different consumer, thus crucially expanding the customer and revenue base.