A rising tide lifts all ships, and since Steph Curry's brand is increasingly proving to be unsinkable, Under Armour's stock may be a bargain at its current levels.

The king of sneaker endorsers remains Michael Jordan, a player who hasn't laced up a pair of his own shoes in a professional basketball game since 2003. His endorsement model is what both Under Armour and Nike (NKE) -- which distributes the Jordan brand -- are looking to duplicate. On-the-court performance doesn't matter. Bad publicity doesn't matter. The only thing that matters in selling his shoe is the Jumpman insignia.

That type of drawing power wasn't acquired overnight, it took back to back championship three-peats, countless commercials and a movie co-starring Bugs Bunny to achieve that type of influence. Curry's star power is nowhere near that level yet, but he is well on his way.

"He's selling a pretty remarkable amount of shoes, much faster than it took Lebron or Durant to get to this level," NPD Sports Industry analyst Matt Powell told Sports Illustrated in a recent article.

Earlier this year Morgan Stanley had a mixed note on the Baltimore-based company, saying that the stock's 65x price-to-earnings ratio was unjustifiable. But analyst Jay Sole did couch that sentiment by saying, "Its Stephen Curry signature shoe business is already bigger than those of LeBron, Kobe, and every other player except Michael Jordan. If Curry is the next Jordan, our call will likely be wrong."

Fast forward to today, amid industry headwinds caused by the closing of retailer Sports Authority, analysts at Canaccord are buyers of the company ahead of its second-quarter earnings release on Tuesday. The firm believes that investor sentiment is ready to turn positive after three months of falling following Under Armour's first-quarter earnings release.

"With the TSA sales impact already embedded in the stock, we believe the risk/reward for UA is favorable going into 2H and 2017 as gross margins rebound, inventory normalizes, and sales comparisons ease in 2H," analyst Camilo Lyon wrote. "We expect the 50%+ growth in footwear to continue for the foreseeable future, as new product intros across running (Slingshot, SpeedForm Gemini 2 RE, UA Architect), basketball (Curry 3.0 is scheduled for a fall release) and golf have been well received boding well for future releases."

Canaccord has a $65 price target that represents a potential 54% upside from the stock's opening price today.

A rising tide lifts all ships, and since Steph Curry's brand is increasingly proving to be unsinkable, Under Armour's stock may be a bargain at its current levels.

Leave A reply

Please login or register to comment