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

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.

Latest Ratings for UA

May 2019UpgradesNeutralOverweight
Feb 2018MaintainsNeutralNeutral
Jan 2017Initiates Coverage OnBuy

View More Analyst Ratings for UA
View the Latest Analyst Ratings

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