Under Armour (UA) Feeling Under-Loved

Shares of Under Armour (UA) closed on Wednesday at $32.92, 55% off the 52-week high of $73.40. And yet, according to an interesting company profile in today’s New York Times, "There are two kinds of people in the world: those who know what Under Armour is, and those who are just finding out." Marshal Cohen, the chief analyst for the NPD Group, told the Times that "they connect better with the consumer than any brand we’ve seen in a decade."

Under Armout started out with a very small niche product but, through innovative marketing and aggressive branding, appears to be developing into something much bigger than athlete-oriented undergarments. The company’s first shoe has sold half a million units since it was introduced two months ago, and the company’s second quarter revenues rose 30%, in an economy that’s been tougher on sporting goods companies, like Dick’s Sporting Goods, than any in recent memory.

Here’s the bottom line: Under Armour has a market cape of $1.6 billion instead of the $3.2 billion it had a few months back, and it seems as likely to become the next Nike as ever and more likely to become the next Nike than any other company I can think of.

The stock price’s recent decline may be spooking investors and draining a lot of the excitement out of expectations for the company’s future. What kind of king in waiting has its stock price decline 50% in the early stages of its growth?

Answer: Nike, whose stock closed at a split-adjusted $3.26 on November 1st of 1982 and then closed at 48 cents 2 years later. Now the stock is at $62, many dividends later.

Bottom line: Under Armour appears to be making all the right moves in developing its brand positions and, in the long run, it’s value will be determined by its ability to deliver on that. Its future looks as bright as it ever has, and savvy investors may want to look at the current price as a buying opportunity.

Zac Bissonnette