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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 - Under Armour, Inc. NYSE:UA, Nike, Inc. NYSE:NKE

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 UA 2.77%.

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.
  • 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.

Jun 2016Buckingham ResearchUpgradesNeutralBuy
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