Under Armour: There's A Bull Case For Every Bear Case

Deutsche Bank recently held a bull versus bear debate with an athletic sector expert. Here’s an overview of the bull and bear cases for Under Armour Inc (NYSE: UA).

Bull Case

• The launch of Sportswear and location expansion could be catalysts for growth.
• Operating margin pressure is only a short-term issue, and there is room for margin expansion in the longer term.
• Under Armour has a wide open opportunity for international expansion.
• There is a huge opportunity for Under Armour in footwear.
• Q4 comps are relatively easy, and Sportswear, international growth and footwear could produce a strong quarter.
• High employee turnover is a normal part of the growth cycle.
• The stock’s valuation has always been high, but the company provides a unique global growth story.

Related Link: Nike Drops Golf Equipment: Here's How You Can Take Advantage

Bear Case

• The core North American apparel business is cooling.
• Operating margins have been shrinking.
• Competition from Nike Inc (NYSE: NKE) and others is tougher outside of North America.
• Growth numbers seem more impressive than they are given the company’s small base.
• Under Armour is too depended on Steph Curry.
• Guidance is already baking in a Q4 recovery.
• The multiple management departures (CFO, Chief Merchandising Officer, Chief Digital Officer, Women’s Creative Director) are troubling.
• The stock’s upside is limited given its steep valuation and aggressive growth guidance.

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