Tonight, two superstars will square off in Game 1 of the NBA Finals. In corporate America, their respective sponsors, Under Armour (UA) and Nike (NKE), have been dueling for years.
So who’s primed to perform better: Curry or LeBron? UA stock or NKE stock?
Let’s take a look at the matchups.
The Underdogs: Stephen Curry, UA Stock
Stephen Curry, the 27-year-old shooting phenom and first-time NBA MVP winner, was signed by Under Armour in 2013. The 6-foot-3 Curry, who played college ball at Davidson College in North Carolina after being overlooked by the major Division I college programs, was also thought by many to be too short to be effective in the NBA.
He was decidedly not too short. Four months into his first season, Curry had already logged a triple-double and was a real contender for Rookie of the Year. He has continued to hone his game, and now holds the single-season record for most 3-pointers made; he’s now widely considered to be one of the purest shooters of all-time.
Under Armour has a Cinderella story of its own — Kevin Plank started it in his grandmother’s basement, making moisture-wicking shirts. Since UA stock went public in 2005 shares are up more than 1,200%, fueled by the Baltimore-based apparel company’s attempts to dethrone NKE as the default king of the athletic apparel industry.
Last year, Under Armour overtook Adidas as the No. 2 sportswear company in the U.S. But with Stephen Curry (and his own shoe line) on its squad, UA stock isn’t finished. It’s going after Nike’s bread-and-butter: athletic shoes.
The Favorites: LeBron James, NKE Stock
Unlike Curry, LeBron James doesn’t know what it feels like to be overlooked. Drafted as the No. 1 pick straight out of high school, his nickname is “The King.” As a high school junior, he graced the cover of Sports Illustrated. The headline read simply: “The Chosen One.”
Even more remarkably, the early buzz turned out to be entirely warranted. LeBron is an 11-time NBA All-Star, 4-time NBA MVP, and 2-time NBA Champion and NBA Finals MVP. He’s got a pair of Olympic gold medals for good measure. But tonight, when Bron-Bron’s Cleveland Cavaliers face Curry’s Golden State Warriors, the 6-foot-8 living legend will have to fight for the spotlight with Curry.
NKE finds itself in a similar dynamic with UA. Nike’s sales are expected to grow by 9.7% this year and 6.3% in 2016. Under Armour, on the other hand, is expected to grow revenues by 24.1% in 2015 and 22.6% next year.
That’s not the only thing that investors should consider in the NKE vs. UA matchup. In the world of retail, there’s one metric that stands out above all others as a measure of brand strength and pricing power: gross margins. While Nike’s gross margins of 45.8% are better than the industry’s 44% average, they fall short of UA, which enjoys 48.9% gross margins.
While Under Armour may need a decade or more to approach Nike’s annual revenues, it’s gaining ground, and that’s much more exciting to me than the Steady Eddie pace of Nike’s growth. Over the long term, I’m bullish on UA stock, which I expect to penetrate markets Nike entered long ago.
And Stephen Curry could dethrone “The Chosen One” by the end of the month. I’m certainly not counting out the underdog in that matchup, either.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. A native Charlottean, he played Stephen Curry’s squad as a youngster. His team lost. You can follow John on Twitter at @divinebizkid or email him at editor@investorplace.com.
