Similar to our view of Nike, we like Under Armour more on a longer-term duration rather than the immediate-term TRADE duration. We added and removed UA from the virtual portfolio due to macro risks but Hedgeye Retail Sector Head Brian McGough remains bullish on the company for a variety of reasons.
First, UA is a great brand with solid recognition. It basically rolled into the market a decade ago and “punched Nike in the jaw” with its line of compression apparel. The company also has a habit of reinvesting capital back into the business rather than pumping up operating margins.
For the TRADE duration, UA is looking a little too expensive for some. But as far as the TREND and TAIL durations go, we like UA for the long run. Look for a stronger dollar to boost UA’s margins due to the company’s lack of international operations. We also estimate that UA will be pushing out $3 billion in revenue by 2014 compared with $1.5 billion in 2011.
