Why UA Stock Loss & Under Armour Earnings Are No Concern

- August 3, 2017

Back in February, we found with data from HADE Platform that despite Under Armour Inc (NYSE:UA) (NYSE:UAA) apparent struggles, its performance is remarkably similar to what Nike Inc (NYSE:NKE) experienced in a near identical point in its business cycle, back in 1995. We showed in a very descriptive, illustrative post that Under Armour Inc is not only still on a trajectory to become another Nike, but is performing better. The bottom line: Under Armour’s seemingly dismal year is very likely nothing to fear.

If you have not read the linked post above, I urge you to do so.

That said, we have 4000 shares of UA stock in the BNL Portfolio, a holding that is currently down 7.3%. It would seem like a no-brainer to purchase more Under Armour stock if data and readings from AI, NIC, suggest its current struggles are nothing more than a natural part of its business cycle before growing much larger. However, that conclusion isn’t so simple.

When Wall Street turns on retail it is often a long hard road back to good graces. These stocks get hammered, and often stay deeply undervalued for a long time. Just look at Michael Kors and Fossil trading at 10x earnings, or JC Penney and Sears trading at .04 and .13 times their respective sales. Even Macy’s, one of the most iconic retailers in history, has seen its stock fall from north of $70 to the low 20s.

No, Wall Street doesn’t discriminate against retail. It hates all equally. And for that reason, it does not matter what artificial intelligence or trend and historical trend analysis from HADE suggests. Truth is Under Armour stock could stay at current levels for a long time, or it could even dip lower.

Albeit, we do believe there is a great chance for UA stock to eventually surpass $50/share once more. Under Armour Inc (NYSE:UA) (NYSE:UAA) is a great company, and they have a lot of good things going with college football, the NFL, and key endorsements with the likes of Steph Curry and Tom Brady.

Source: HADE PlatformOne big reason for UA stock’s struggle is the dismal performance of footwear revenue. Ironically, Under Armour’s strongest asset is currently its biggest problem, Steph Curry.

Last year’s signature shoe fell short of expectations. However, the Curry 4 is expected to do much better, and will have favorable comps that should lead to accelerated growth. If that happens, UA stock may recover sooner than later. The big unknown is how quickly Wall Street buys the recovery. Given that Under Armour is retail, that is indeed a big unknown.

Nonetheless, we remain extremely bullish long-term that Under Armour Inc (NYSE:UA) (NYSE:UAA) will continue to grow its empire through footwear. For that reason, we feel good about holding 4,000 shares, but because of the history with retail, are not rushing to up that stake anytime soon. We are prepared to hold UA stock through the good and bad.

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