Under Armour is Looking Like a Better Fit for Growth Investors With a solid first half of the year in the books, growth investors have an opportunity to jump in on a stock that is fast on the comeback trail.

Back in 2015 Under Armour (NYSE: UAA) was flying high as an upstart challenger to Nike and other industry incumbents. The athletic apparel maker then fell into a major slump shedding more than 60% of its market value from 2016 to 2017 following a series of missteps.

Fast forward four years and Under Armour appears to be back in the game thanks to a well-executed turnaround strategy. Faced with navigating the pandemic economy, management has thus far done a solid job of getting the company back on track.

More work remains, however, in an ultra-competitive sports clothing and equipment market that has had to rethink its business model in 2021. But with a solid first half of the year in the books, growth investors have an opportunity to jump in on a stock that is fast on the comeback trail.

How Has Under Armour Performed in 2021?

Under Armour's first and second-quarter results in 2020 were understandably dismal given the early impacts of COVID-19. For the six-month period, the company posted a $0.65 per share net loss. The good news was that this set it up for some favorable comps in 2021.

The year started out with sell-side analysts expecting a slim profit of $0.03 per share in Q1. Under Armour crushed the cautious expectation delivering adjusted EPS of $0.16. The Street didn't give the company enough credit for the momentum in the business in Q2 either. Earlier this month, management announced Q2 EPS that was four-times the consensus expectation of $0.06 per share.

What is driving the big earnings beats this year? The most encouraging thing for investors is that its hard to point to one thing. Growth has been very much broad-based both geographically and across business lines. The recent outperformance has also been reflective of a stronger operating model and investments made in product development and marketing.

Under Armour is seeing strong demand in both the wholesale and direct-to-consumer businesses these days. Unlike the second half of 2020 when e-commerce drove results, the MVP has been good old fashioned brick-and-mortar growth. This includes both the main sporting goods retail channel as well as the company's own physical stores.

What are Under Armour's Growth Prospects?

On the heels of its most recent report, Under Armour management offered a bright outlook for the remainder of the year. It hiked its forecast for 2021 revenue growth from the high-teens to the low-twenties. Earnings guidance was also raised sharply from $0.29 to $0.51 at the midpoints.

It's easy to see why management is so optimistic about Under Armour's path. Simply put, consumers, anxious to return to their fitness and recreation filled lifestyles, are buying a lot more stuff. With most stores fully reopened, sales of apparel, footwear, and accessories are all on the rise.

This goes for both North American and international businesses. Last quarter revenues were up more than 300% in Latin America, a sign that the Under Armour brand is gaining traction overseas. And with international sales roughly one-third of the business, opportunities to expand into new and existing international markets are aplenty.

Even though e-commerce sales have slowed from their torrent pace of last year, Under Armour's online business will remain a key part of the growth strategy going forward. A major catalyst here is expected to be UA Flow, the new digital platform designed to use real-time customer data and analytics to drive marketing campaigns in key categories like sports training and running.

Is Under Armour Stock a Buy?

Under Armour shares are up 37% year-to-date but have more room to run. From a technical analysis perspective, the 10-day winning streak to kick off August came in heavy volume. This suggests that institutional money is flowing into the stock and that the heavy hitters expect more gains are ahead. The last time daily volume spiked above 20 million shares as it did on August 3rd, it ignited a seven-month rally from $13.84 to $25.53.

Investors that pay attention to classic chart patterns may have also noted a bullish event prior to the big volume surge. On July 21^st a continuation wedge formed on the daily chart when Under Armour was trading around $20. That pattern has more life in it given the duration predicted duration was 55 days and the target price range $27.50 to $29.00. The recent support at the 50-day moving average line also bodes well for the near-term uptrend.

Under Armour also has good support from the Street. Since the company's second-quarter report, eight firms have issued "buy' ratings compared to six "holds' and one "sell'. Target prices from those analysts vary widely from BTIG's $15 target to UBS's $38 target.

There's good reason to believe the bulls have this one right. Under Armour now has the wind at its back after topping earnings expectations in each of the last five quarters. And with the stock trading at 30x trailing earnings compared to 47x for Nike, there's a big valuation gap to be filled in the months ahead.

Under Armour is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.