Under Armour Inc (NYSE:UA) is a Baltimore, Maryland-based sports apparel and equipment manufacturer.
When the world’s leaders asked its citizens to wear masks, the company responded with a high-performance Sportsmask. Still, it may not be enough to help UA share price.
UA stock peaked in 2016 and took a long time to recover from the COVID crash, so now is Under Armour stock a Buy?
The company’s textiles are the peak of synthetic/natural blends, and it implemented smart sensors that changed the game. But smart clothing isn’t widely available yet, and the company halted its mHealth platform in January 2020.
Retailers got hit hard by the pandemic, and UA was already hurting in the back half of the 2010s. At one point it was outperforming giant Nike Inc (NYSE:NKE) in sales, but it couldn’t hold onto that growth. The company struggled to extend its brand beyond the apparel business, which accounts for about three quarters of sales.
It’s time to run the numbers to determine if Under Armour is a breath of fresh air for investors of if it will leave a stink on their portfolios.
Under Armour is an American sports apparel company. Its claim to fame is the soft, sweat-wicking textiles used in its clothing. These textiles are specially created to protect athletes from the weather – cold, hot, rain, or shine.
Soon, it was featured in movies, like Any Given Sunday, after which UA gear became coveted by professional athletes across sports. It got featured in ESPN magazine and soon had licensing deals with Major League Baseball, along with becoming the official supplier of the National Hockey League.
It’s also the official supplier of the NFL Scouting Combine. And it sells Combine-related apparel and accessories to fans.
By 2005, the company went public and expanded its product line. It created shoes to compete directly with Nike (NKE) and continued innovating its textiles to make men and women’s underwear.
And Under Armour brought its sports-minded brand digital through acquisitions of MapMyRun, MyFitnessPal, and Endomondo. Plus, it added shoes with trackers to bridge the ecosystem.
Under Armour combines its professional and amateur athlete markets through a series of smart marketing partnerships. This makes it an authentic voice of fitness-minded individuals across the world. But is its stock a worthy investment?
Is Under Armour Stock A Buy?
Under Armour started 2021 with a market capitalization under $7.5 billion and a P/E ratio around 16.50. The company’s share prices fell to a 52-week low of $7.15 during the coronavirus pandemic, and it still hasn’t recovered to former price highs.
Before the pandemic, shares traded between $20.00 and $30.00, and that’s down from the $40.00 to $50.00 range trading in 2016.
Several factors contributed to the strangled stock price. Two big sports retailers, Sports Authority and Sports Chalet, went out of business in 2016. Meanwhile, it struggled to build its fitness platform
The company is still profitable though – third quarter 2020 revenue clocked in at $1.4 billion, while operating income was $118 million. It comes out to $0.26 GAAP-adjusted diluted earnings per share.
And Under Armour has $866 million in cash on its books with no outstanding debt from its $1.1 billion revolving credit lines. This gives investors reason to believe it’s a good bet for the next decade. Of course, there are still plenty of concerns to address.
Under Armour Acquisitions Have Not Been Stellar
Under Armour is a leader in the sports undergarment industry, but it can’t break out of that. The company ended up selling its MyFitnessPal platform while discontinuing Endomondo, leaving only MapMyFitness left in its connected fitness segment.
The company spent five years building a connected fitness platform and much of the 2010s touting smart clothing with Google (GOOG). But 2020 came and went with no real gains in the smart clothing industry.
People simply aren’t lining up for it, and even companies with wearable trackers like Pebble and Fitbit can’t stay afloat.
Meanwhile Peloton (PTON) made huge connected fitness gains during the pandemic. It shows there was definitely a market for the product, but nobody was addressing it correctly. Under Armour especially struggles with technology compared to Nike.
And the jump in e-commerce isn’t helping struggling brick and mortar retailers. UA could find itself buried under an avalanche of failing retail and sports-based businesses. It didn’t have the media buzz of its competition.
Can Under Armour Competitors Win?
UA has stiff competition in the sports apparel industry. While Reebok, Adidas, and Sketchers are all a presence, the big hitters in 2020 are perennial giant Nike and rising star Lululemon Athletica Inc (NASDAQ:LULU).
Each of these companies made big gains over the past year by optimizing e-commerce sales. They also have their own branded stores that mean competition-free sales of their own brands.
If UA isn’t careful, it could lose its shine to either of these giants, both of whom are aggressively competing in lanes Under Armour wants to be in.
Is Under Armour Stock A Buy? The Bottom Line
Under Armour is an innovative textile and sports clothing company based in the United States. It rose to prominence through a combination of highly engineered sweat-wicking clothing and smart marketing that involves both Hollywood and professional sports leagues.
By becoming the official supplier of specific leagues, the company cemented itself as a hot commodity from sports fans and amateur athletes. But time on that throne is fleeting.
Giants like Nike and Lululemon are working hard to increase their own sales. That can eat into UA’s future growth potential. Still, it’s a big company with brand equity and a lot of cash in its coffers. It can bounce back to continue making a dent in the championship rounds.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.