Under Armour Can Grow Top-Line 25% A Year, BoA Says After Visiting HQ

After meeting with CEO Kevin Plank and other management, Bank of America analyst Robert Ohmes is convinced that Under Armour Inc UA can continue to grow sales by 25 percent annually. The meeting with management and the company’s Q1 earnings beat convinced Ohmes to raise his 2016 earnings estimate from $0.65 to $0.66.

In the footwear space, Stephan Curry’s Curry 2 basketball sneaker continues to perform well, and Ohmes sees plenty of marketing opportunities for Curry in Kid’s, China, core wholesale and direct-to-consumer segments. In addition, Under Armour has demonstrated pricing power, as average sales prices on footwear have continued to inch higher.

Ohmes sees China as one of Under Armour's biggest opportunities.

“China should exceed $160 MM in revenues in 2016 ($30MM in 2014) with strong profitability and is benefitting from higher average prices vs. U.S., fast development of e-commerce (partnership with T-Mall), strong performance of women’s apparel, and higher footwear penetration (roughly 50% in China vs. 15-20% in North America),” he explains.

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Unfortunately for shareholders, the market has not been nearly as impressed by Under Armour as Ohmes is in 2016. The stock is down 42.2 percent year-to-date.

Bank of America maintains a Buy rating on Under Armour and a $54 price target for the stock.

Disclosure: the author holds no position in the stocks mentioned.