Under Armour’s Growth Is Still Intact

Under Armour’s Growth Is Still Intact

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Despite its steep valuation, Under Armour ( UA ) has managed to move higher this year due to its strong growth. With the stock currently trading at almost 50x trailing earnings, it may appear the stock has no more significant upside left. However, there are a few catalysts that can take Under Armour higher in the near future.

A New Partnership

Recently, it was disclosed that Under Armour is planning to bring its footwear and apparel to KohlAAAs Corporation ( KSS ) stores next year. The company detailed that it would initially introduce its services at around 600 KohlAAAs stores and then expand its services to more than 1,100 KohlAAAs stores by the end of the year.

The companyAAAs management detailed that it has been working on this deal for a long time. The companyAAAs primary reason to partner with KohlAAAs is its massive loyal customer base. Most significantly, a major portion of that customer base are women.

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Products target toward women are anticipated to account for $1 billion of the companyAAAs overall $4.95 billion sales this year. This is the primary reason why Under Armour is interested in partnering with KohlAAAs, not because of Sports AuthorityAAAs failure. Thus, this deal looks like a win-win for both companies.

Apart from this, the company also has plans to move in to the sportswear business, as it is a $15 billion market. The motive behind this decision is to prolong its reach beyond its prevailing athletic apparel.

International Prospects

Under Armour is aggressively focusing on the International market, comprising western markets such as U.K. as well as massive potential markets in China. Under Armour believes that China has huge opportunities and the company is on its way to open massive new retail stores in 2016.

Apart from this, Under Armour is also focusing on the running segment. The companyAAAs Speedform line has aided it to achieve adhesion in the running market. Moreover, the Gemini 2 Record Equipped, which has a chip that connects the shoe to its userAAAs MapMyRun application, has provided the company with a technological gain in the footwear race as well.

Going forward, international growth should drive Under Armour higher, which is why I am still bullish on the stock.

Conclusion

Under Armour may be trading at a rich earnings multiple, but the stock can continue moving higher. Strong growth driven by the aforementioned initiatives could take Under ArmourAAAs stock close to $50 by the end of the year.

Disclosure: I don’t hold a position in any of the stocks mentioned in the article.

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