Under Armour Inc - Ordinary Shares - Class C

Fundamentals

The bullish thesis for UA is simple: It's growing faster than peers. It's executing better than peers. It has a vision clearer than its peers and it has a stock price that has risen higher than its peers by huge amounts over the last two-years. Period.

While the stock market has been in correction mode, UA stock is up 19% in the last three-months and 52% in the last year.

Under Armour has stepped boldly into the sports apparel and sports celebrity endorsement segment going head to with industry giant Nike. UA CEO Kevin Plank has named a goal of building a $1 billion brand (from a $100 million basketball brand) around Golden State Warriors star (and NBA MVP) Stephen Curry with a focus on the Curry One (and Two) signature basketball shoe. With the Warriors and Stephen Curry winning the NBA championship, Plank's bet is looking pretty sweet.

Here's a chart of UA's revenue and net income through time. Note that revenue is at all-time highs, and net earnings (net income) are just off all-time highs.



UA has also dipped into Lululemon Athletica's business of "Wunder Unders." You can read our full write up on LULU here: How Lululemon Disrupted Everything But Now Faces Trouble. UA has found that high margins (i.e. premium prices) with a solid brand name can do wonders (no pun intended) for it as well. Hat tip to LULU for inventing the market and hat tip to both Nike and UA for imitating to compete.

But the real business model right now is simply: Beat Nike. In order for that to happen, UA is going to have to go after the basketball shoe market, and it is. CNN Money writes:
That same source tells us that Nike currently owns about 90% of the basketball show market, but of course, the Curry One is the new face of the segment now that its namesake was named league MVP and become the NBA world champion with the Warriors. There is momentum for UA in this segment, it's tangible.

One last piece of the puzzle for UA is its foray into the Internet of Things for sports apparel. Under Armour claims it is adding a massive 100,000 new users a day to its Connected Fitness community platform. That's on top of the 140 million users already there. That makes the firm's social presence about 40% as large as Twitter.

The bearish argument surrounds some reasonable scepticism that this "social" piece will drive little return on investment and a fair question as to "where this is all going?". The bullish thesis, supported by UA's CEO Kevin Plank surrounds the idea that everything will eventually led to brand awareness, loyalty and eventually sales. The CNN Money article writes, "The signature piece of this vision is a gear tracker that allows people to track the performance of their shoes or other Under Armour pieces as they are working out."

The Elephant in the Room
UA announced a stock split which seems totally innocuous at first blush, but it is not innocuous. As InvestorPlace puts it so well:
For now, UA is a growing company that hasn't had a "miss" in a long time. There is tangible momentum in the business and the stock market reflects that rather abruptly.