With shares of Under Armour (NYSE:UA) trading at around $52.64 is UA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Who would have thought that moisture-wicking fabric would be the wave of the future when it comes to sports apparel? The domestic textile industry as a whole fell apart in the early 2000s, yet here comes Under Armour taking everyone by surprise and taking its investors to the promise land.
Contrary to popular belief, Under Armour’s apparel isn’t always tight. Some people who don’t know Under Armour’s products well will stay away from the brand for this reason alone. However, you can buy Under Armour in three different fits: Tight, Loose, and Athletic. Part of the reason a lot of people don’t know this is because of the early marketing approach used by Under Armour. We would see muscle-bound athletes showing off their muscles in tight shirts. This can be intimidating.
Despite the misconception by many people, this can be looked at as a positive. For example, the company still grew at an incredible rate while only marketing to a select crowd. As the general population begins to realize that Under Armour might also be for them, the growth opportunity becomes even greater.
The women’s market will also grow for Under Armour. Under Armour recently embarked on a “Sweat Every Day” campaign that will be made up of short videos between 15 and 60 seconds. These videos will target females, and they will be played on MTV, VH1, Bravo, and E!. Yeah, that covers a variety of interests. The annual growth rate for Under Armour’s women’s segment has been 30% over the past five years. You should fully expect that number to improve over the next five years.
Perhaps the biggest catalyst of all has been youth choosing Under Armour over Nike (NYSE:NKE). In the eyes of the youth, Under Armour is simply cooler. This might be a huge market for Under Armour right now, but wait until they attack Nike in the shoe department. That will be one serious battle. If Under Armour takes significant market share away from Nike, then you’re going to see incredible growth for Under Armour. That said, Nike is no slouch when it comes to marketing, and they certainly won’t go down without a fight. For example, Nike just signed Tiger Woods (not as impactful as it might have been in the past,) which should help with their overall image, but it’s still not going to mean much for the youth market.
Under Armour is slowly but steadily building an empire. Under Armour is now the footwear supplier of the NFL, and they partnered with the NBA in 2011. It doesn’t get much better than that, especially for a company that has been public for less than a decade.