Under Armour, Inc. is a well-known American sports apparel and footwear company that has been a major player in the athletic wear market for over two decades. Founded in 1996 by Kevin Plank, the company has grown significantly over the years, with a brand valued at over $5 billion. However, like any other investment opportunity, it’s essential to evaluate whether Under Armour is a good investment for your portfolio. In this article, we’ll delve into the company’s history, financial performance, market trends, and competitive landscape to help you make an informed decision.
Company History and Overview
Under Armour was founded by Kevin Plank, a former University of Maryland football player, who started the company from his grandmother’s basement. Initially, the company focused on producing moisture-wicking T-shirts for athletes, which quickly gained popularity among football players. Over the years, Under Armour expanded its product line to include footwear, outerwear, and accessories, and the company went public in 2005.
Today, Under Armour is a global company with a presence in over 120 countries, employing over 15,000 people worldwide. The company’s product portfolio includes popular brands such as Under Armour, Curry, and HOVR, among others. Under Armour has also partnered with several high-profile athletes, including Stephen Curry, Tom Brady, and Jordan Spieth, to promote its brand and products.
Financial Performance
Under Armour’s financial performance has been a subject of concern in recent years. The company’s revenue growth has slowed down significantly, and it has faced intense competition from rival brands such as Nike and Adidas. In 2020, Under Armour reported a net loss of $549 million, compared to a net income of $52 million in 2019.
However, the company has been taking steps to revamp its business and improve its financial performance. Under Armour has been focusing on its digital transformation, investing heavily in e-commerce and digital marketing. The company has also been working to improve its product offerings, launching new products such as the Curry 8 basketball shoe and the HOVR Phantom running shoe.
| Year | Revenue (in billions) | Net Income (in millions) |
|---|---|---|
| 2019 | $5.27 | $52 |
| 2020 | $4.45 | -$549 |
| 2021 | $4.53 | $113 |
Market Trends and Competitive Landscape
The athletic wear market is highly competitive, with several major players vying for market share. Nike and Adidas are the two largest players in the market, with a combined market share of over 50%. Under Armour is the third-largest player, with a market share of around 10%.
However, the athletic wear market is growing rapidly, driven by increasing demand for athletic wear and footwear. According to a report by Grand View Research, the global athletic wear market is expected to reach $208.42 billion by 2025, growing at a CAGR of 6.7% during the forecast period.
Key Trends in the Athletic Wear Market
- Sustainability: Consumers are increasingly looking for sustainable and eco-friendly products, and athletic wear brands are responding by launching sustainable product lines.
- Digital Transformation: The COVID-19 pandemic has accelerated the shift to online shopping, and athletic wear brands are investing heavily in e-commerce and digital marketing.
- Performance Wear: Consumers are looking for high-performance products that offer comfort, durability, and style, and athletic wear brands are responding by launching high-performance product lines.
Investment Analysis
So, is Under Armour a good investment? The answer depends on your investment goals and risk tolerance. Here are some pros and cons to consider:
Pros:
- Brand Recognition: Under Armour is a well-known brand with a strong reputation for quality and performance.
- Product Innovation: The company has a strong track record of innovation, with popular products such as the Curry 8 basketball shoe and the HOVR Phantom running shoe.
- Digital Transformation: Under Armour is investing heavily in e-commerce and digital marketing, which could drive growth in the future.
Cons:
- Financial Performance: Under Armour’s financial performance has been a subject of concern in recent years, with the company reporting a net loss in 2020.
- Competition: The athletic wear market is highly competitive, with several major players vying for market share.
- Valuation: Under Armour’s valuation is relatively high, with a price-to-earnings ratio of around 30.
Conclusion
Under Armour is a well-known brand with a strong reputation for quality and performance. However, the company’s financial performance has been a subject of concern in recent years, and the athletic wear market is highly competitive. If you’re considering investing in Under Armour, it’s essential to weigh the pros and cons carefully and consider your investment goals and risk tolerance.
In conclusion, Under Armour can be a good investment for:
- Long-term Investors: If you’re willing to hold onto your investment for the long term, Under Armour’s brand recognition, product innovation, and digital transformation could drive growth in the future.
- Growth Investors: If you’re looking for a growth stock, Under Armour’s investment in e-commerce and digital marketing could drive growth in the future.
However, Under Armour may not be a good investment for:
- Value Investors: If you’re looking for a value stock, Under Armour’s valuation is relatively high, with a price-to-earnings ratio of around 30.
- Income Investors: If you’re looking for a dividend stock, Under Armour does not pay a dividend.
Ultimately, the decision to invest in Under Armour depends on your individual circumstances and investment goals. It’s essential to do your own research, consider your risk tolerance, and consult with a financial advisor before making any investment decisions.
What are the key factors to consider when evaluating Under Armour as an investment opportunity?
When evaluating Under Armour as an investment opportunity, there are several key factors to consider. First, it’s essential to analyze the company’s financial performance, including its revenue growth, profit margins, and debt levels. Additionally, investors should assess the company’s competitive position within the athletic apparel market, including its brand recognition, product offerings, and distribution channels.
Investors should also consider the company’s management team and their track record of executing on strategic initiatives. Furthermore, it’s crucial to evaluate the company’s growth prospects, including its expansion plans, product innovation, and potential for entering new markets. By carefully considering these factors, investors can gain a comprehensive understanding of Under Armour’s investment potential.
How has Under Armour’s stock performed in recent years, and what are the trends?
Under Armour’s stock performance has been volatile in recent years, with the company experiencing significant declines in 2017 and 2018. However, the stock has shown signs of recovery in recent years, driven by the company’s efforts to revamp its product offerings, improve its e-commerce capabilities, and expand its international presence.
Despite the recent gains, Under Armour’s stock still faces significant challenges, including intense competition from rival brands such as Nike and Adidas. Additionally, the company’s stock is heavily influenced by consumer trends and preferences, which can be unpredictable. As a result, investors should carefully monitor the company’s stock performance and be prepared for potential fluctuations.
What are the main risks associated with investing in Under Armour?
One of the main risks associated with investing in Under Armour is the intense competition in the athletic apparel market. The company faces significant competition from established brands such as Nike and Adidas, as well as newer entrants such as Lululemon and Athleta. Additionally, Under Armour’s reliance on a few key products and brands, such as Curry and HOVR, makes it vulnerable to changes in consumer preferences.
Another risk is the company’s significant debt levels, which can limit its ability to invest in growth initiatives and respond to changing market conditions. Furthermore, Under Armour’s international expansion plans are subject to various risks, including currency fluctuations, regulatory challenges, and cultural differences. Investors should carefully consider these risks before making an investment decision.
How does Under Armour’s valuation compare to its peers in the athletic apparel industry?
Under Armour’s valuation is generally lower than its peers in the athletic apparel industry, with a price-to-earnings ratio that is significantly lower than Nike and Adidas. However, the company’s valuation is higher than some of its smaller peers, such as Lululemon and Athleta. This suggests that investors have lower expectations for Under Armour’s growth prospects compared to its larger peers.
Despite the lower valuation, Under Armour’s stock is still subject to significant volatility, driven by changes in consumer trends and preferences. Additionally, the company’s valuation can be influenced by various factors, including its financial performance, competitive position, and growth prospects. Investors should carefully evaluate Under Armour’s valuation in the context of its peers and the broader market.
What are the potential catalysts for Under Armour’s stock price in the near term?
One potential catalyst for Under Armour’s stock price is the company’s efforts to revamp its product offerings and improve its e-commerce capabilities. If the company is successful in these initiatives, it could lead to improved sales growth and profitability, which could drive the stock price higher. Additionally, Under Armour’s international expansion plans could provide a catalyst for growth, particularly if the company is able to successfully enter new markets and gain traction with local consumers.
Another potential catalyst is the company’s cost-cutting initiatives, which could lead to improved profitability and cash flow. Furthermore, Under Armour’s partnerships with high-profile athletes and celebrities could provide a boost to the company’s brand recognition and sales. Investors should carefully monitor these catalysts and be prepared for potential fluctuations in the stock price.
How does Under Armour’s sustainability and social responsibility initiatives impact its investment potential?
Under Armour’s sustainability and social responsibility initiatives can have a positive impact on its investment potential by enhancing the company’s brand reputation and appeal to environmentally and socially conscious consumers. The company’s efforts to reduce its environmental footprint, improve working conditions in its supply chain, and promote diversity and inclusion can also help to mitigate risks and improve its long-term sustainability.
However, the impact of these initiatives on Under Armour’s investment potential is still uncertain and depends on various factors, including the company’s ability to execute on its sustainability goals, the response of consumers and investors, and the overall market trends. Investors should carefully evaluate Under Armour’s sustainability and social responsibility initiatives as part of their overall investment analysis.
What is the long-term outlook for Under Armour’s business and stock price?
The long-term outlook for Under Armour’s business and stock price is uncertain and depends on various factors, including the company’s ability to execute on its strategic initiatives, the response of consumers and investors, and the overall market trends. However, if the company is successful in revamping its product offerings, improving its e-commerce capabilities, and expanding its international presence, it could lead to improved sales growth and profitability, which could drive the stock price higher.
Additionally, Under Armour’s efforts to improve its sustainability and social responsibility could enhance its brand reputation and appeal to environmentally and socially conscious consumers, which could also contribute to long-term growth. However, the company still faces significant challenges, including intense competition and changing consumer trends, which could impact its long-term outlook. Investors should carefully evaluate Under Armour’s long-term prospects and be prepared for potential fluctuations in the stock price.