UA Stock: This Is Why Under Armour Inc Could Soar
Markets love growth stories, and that’s precisely why Under Armour Inc (NYSE:UA) stock had a huge bull run in recent years. The question now is this: can Under Armour stock keep its upward momentum?
The answer is yes. Here’s why.
Growing Brand Name
If you play sports or go to the gym, you would know how popular Under Armour is today. This is particularly impressive given that the company did not come into existence until 20 years ago. Back then, the industry was dominated by Nike, Adidas, and Reebok.
Fast-forward to today and Under Armour has completely changed the industry’s landscape. Last year, the company surpassed Adidas to become the second largest sportswear company in the U.S. (Source: “Under Armour Overtakes Adidas in U.S. Sportswear Market,” The Wall Street Journal, January 8, 2015.)
Most recently, Under Armour’s brand image got another big boost from basketball superstar Stephen Curry. He not only leads the entire NBA in terms of points per game, but he also took his team, the Golden State Warriors, to its 70th win this season. Three more games and the team could break the all-time record of 72 wins set by the 1995–1996 Chicago Bulls, led by none other than the great Michael Jordan.
And let’s not forget that Stephen Curry helped his team win an NBA championship last year. The basketball star’s popularity has boosted Under Armour’s sales tremendously.
According to Morgan Stanley (NYSE:MS) analyst Jay Sole, “UA’s US basketball shoe sales have increased over 350% YTD [year-to-date]. Its Stephen Curry signature shoe business is already bigger than those of LeBron, Kobe, and every other player except Michael Jordan.” The analyst said that Curry could be worth $14.0 billion to Under Armour. (Source: “Morgan Stanley: Stephen Curry Could Be Worth $14 Billion to Under Armour,” Business Insider, March 3, 2016.)
Under Armour also hit the jackpot with another one of its sponsored athletes—Jordan Spieth. Last January, the company gave this young golfer a new 10-year contract. A few months later, Spieth won the Masters. And then he won the U.S. Open. By doing so, Spieth became the sixth golfer to ever win the Masters and the U.S. Open in the same year.
With a huge following behind its superstar golfer, the company is launching new footwear in its golf segment. The collection currently consists of three styles—“UA Drive One,” “UA Tempo Tour,” and “UA Tempo Hybrid.”
To be honest, as a sports apparel company, Under Armour’s products have always been wearable. Now, it’s adding technology to its formula.
The most noticeable offering by Under Armour has to be “UA HealthBox.” Introduced at this year’s Consumer Electronics Show (CES) in January, the box contains three products: “UA Band,” a fitness tracking device; “UA Scale,” a connected scale that also measures body fat percentage; and “UA Heart Rate,” a chest strap that tracks your heart rate when you’re working out.
Under Armour has partnered with HTC to launch these devices. For the three products, the UA HealthBox has a price tag of $400.00.
And that’s not all. The company is also making connected sneakers. The latest offering is the “SpeedForm Gemini 2.” This pair of running shoes uses Under Armour’s Record-equipped technology that tracks and stores nearly every running metric. The best part is that there is no need to charge the battery. The company says that the battery power can last beyond the shoe’s life.
The Bottom Line on UA Stock
Sure, UA stock is certainly not cheap. Trading at $43.24 per share after the split, the stock has a price-to-earnings multiple of 41X. However, investors like the company not just because of its current performance, but also for its huge potential down the road.