5/13/2014 – Under Armour is a company that seems to be gaining speed and even though it has a P/E of 62 which is higher than I like, I think this stock is a good long term play. While investors seem to be infatuated with buying Internet and Social Media stock for their high growth, I think UA presents a great option for someone who would like to diversify out of tech.
Under Armour Just Reported Great Earnings
Earnings were reported the last week of April and they were significantly higher across the board:
-Apparel revenue went up by 33% to $459 million
-The footwear division saw an increase of 41% up to $114 million
-Accessories revenue rose by 43% to $52 million
*For the official earnings report click here
I See More And More Of The UA Brand Everywhere I Go
Athletic apparel companies rely heavily on brand identification. No one can dispute that Nike leads the way and will for many years. But I’ve started to notice a lot more Under Armour logos on people as I travel throughout the country. I always like being to personally verify that a company or brand is popular as that further bolsters in my mind the growing earnings that are reported.
Additionally Under Armour is aggressively signing up major athletes and athletic teams for sponsorships as a brand like this must do to build its “cool” factor. The latest big name athlete signing is golfer Jordan Spieth who is only 20 years old but came in 2nd at the Masters and appears to have unlimited potential. While these endorsement deals are costly for Under Armour, they are necessary to compete in the athletic apparel industry so they are not something I am worried about.
The Stock Is Down 23% From Its 52 Week High
Both Under Armour ‘s 52 week high and all time high is $62.40 and the stock trades at about $48 as this is being written. Some of that pullback is market related as high P/E stocks have been hit rather hard lately and some of it is from investor’s interpretation of the earnings call. The #1 thing investors didn’t like was the forward guidance throughout 2014 that was thought to be a bit conservative by management.
It is because it is so far off its high that I especially like this stock. You get a proven growth company that is not near its high and that is rare in today’s topped out market. Under Armour’s popularity, in my mind, is just starting to kick in full gear as we see the brand expand world wide and start to seriously compete with Nike. I’m willing to bet that this stock will do well for investors who have a longer time horizon and the patience to wait out any sudden market pullbacks or corrections.
**This doesn’t meant that the stock won’t go down from here but I rate this stock as a Big Bet Stock anywhere under $50. As always, I would advise you to consult your professional money manager, stock broker, or whoever’s judgment you trust on money matters before you take action on anything written on this website. Everything written on this site is just my personal opinion which I am giving away for free.