Some people, like our own Will Ashworth, are “stock whisperers.” Ashworth is one of the highest-regarded investment analysts on TipRanks, currently ranked 64th out of nearly 11,000 experts. Interestingly, the vast majority of his picks are “buy” ratings. I prefer to mix it up, to the chagrin of Under Armour Inc Class C (NYSE:UA) shareholders. I just never liked UA stock.
I first started casting doubts on the UA stock price in the middle of 2016. Based on the number of people calling me an idiot and other not-safe-for-work descriptions, I sensed disagreement.
At the time, shares were bouncing around between the high $30s and low $40s. Under Armour was significantly off its $55 highs, but no reason for panic existed, hence, my idiocy.
Except for one nagging detail, I was right to signal my warnings. UA stock, no matter how much the bulls may talk it up, is no Nike Inc (NYSE:NKE) or adidas AG (ADR) (OTCMKTS:ADDYY). The latter two have the massive resources to take big risks. More importantly, they have the safety margin should deals go awry.
Under Armour, in my opinion, has no such luxury. It’s an all-or-nothing affair. Like President Trump might say, I only like all-or-nothings if I’m right. As you can see from the UA stock price today, Under Armour gambled and failed, bigly.
The shame of it all was that the sports apparel company exercised discipline in its prior deals. But as it grew overconfident from smaller successes, it decided to go up a few ill-advised weight classes. You now know how this bout ended.
Does UA Stock Deserve a Second Look?
Currently, most folks are debating whether or not cryptocurrencies are a bubble. But apparently, many shareholders were comfortable with the bubble in sports endorsements. Now, I’m not one of those too-cool-for-school types. I love watching professional sports like any other red-blooded American. I also see the value in aligning your brand with superstar athletes.
What I question is the return on investment. For example, back when UA secured an endorsement contract with NBA star Stephen Curry, analysts viewed it as a coup d’etat. Nike was also angling for Curry, but eventually failed to come to terms. Moreover, initial sales results from Curry-branded shoes and apparel exceeded expectations.
However, sports is a fickle industry, and I would argue, more so than cryptocurrencies. As InvestorPlace contributor Luke Lango notes, rival NBA players took the spotlight away from Curry. And some of the other athletes in Under Armour’s portfolio posted middling performance results. Eventually, that negatively impacted apparel sales, dropping the UA stock price.
But given that most, if not all of the pessimism has been priced in, doesn’t UA stock deserve a second look? Year-to-date, shares are down nearly 56%. For such a powerful and popular brand, the bearishness appears overly aggressive. Even the ugliest companies that aren’t facing insolvency have an absolute floor.
Looking at the technical charts for the UA stock price, I can see why people might be optimistic. Currently, shares are trading hands at around $12. Since its closing high of 2016, Under Armour lost roughly three-quarters of its market value.
Surely, even Under Armour is salvageable at these rates?
Bottom Line on UA Stock
I have to admit that as much as I’ve been a critic of UA stock, the present level looks intriguing. I’m not suggesting that Under Armour is a company to bank your entire retirement on. Perhaps as a speculative options play, UA might fit the bill.
The nagging problem, though, is that I just don’t trust it. From a technical perspective, we may have hit bottom. UA hit a multiyear low in early November, and so far, it hasn’t fallen back to that same price point.
But haven’t we been on this rodeo before? In fact, we’ve been on it time and time again. Maybe this time is truly different. As for me, there are smarter ways to spend your money.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
