Jay Sole, an analyst at Morgan Stanley, released a note that put a speculative eye into Under Amour’s business in which he came out impressed but not encouraged.
“We believe that Under Armour is a terrific company with exceptional management and much growth ahead of it,” he wrote.
“However, the question is whether UA’s growth will justify the stock’s 65x [price to earnings ratio]. We don’t think so.”
There is one individual in the sports world, however, who could change it all for the company: reigning NBA MVP Steph Curry.
“UA’s US basketball shoe sales have increased over 350% YTD,” the note said.
“Its Stephen Curry signature shoe business that is already bigger than those of LeBron, Kobe, and every other player except Michael Jordan. If Curry is the next Jordan, our call will likely be wrong.”
Sole named his bull case for the stock “Spicy Curry,” with a price target of $127.50, and said it would become “the world’s No. 2 athletic brand” based on the performance and popularity of Curry.
If Curry continues his streak, the difference in market-cap value of the company could be approximately $14 billion, with Under Armour being valued at about $14.1 billion under Sole’s base case and $28.2 billion in his bull case.
He said the exploding growth in UA’s basketball business could even threaten Nike.
This huge Curry impact has not gone unnoticed by Under Armour.
CEO Kevin Plank has made it known that Curry is a vital source of the company’s outperformance, and the company has focused much of its global advertising on the Warriors star.
Imagine what may have been for them had they brought 2014 NBA MVP Kevin Durant into the mix when it was rumored they might pluck him away from Nike on a shoe deal worth more than $300 million. They may have been a sizable threat to the kingpin Nike and would have definitely gave them a run for their money in sports apparel; but then Under Armour might not have given Curry the time of day and/or the exposure.
Stephen Curry is used to being “overlooked”; like when top-ranked Division I basketball schools did and Curry had to prove he belonged in everybody’s conversation at North Carolina’s Davidson College, where he took the Wildcats to the NCAA Regional Finals his sophomore season.
Even when Curry left Davidson early to go into the 2009 NBA Draft and was picked seventh overall, who was picked behind Hasheem Thabeet, Tyreke Evans, Ricky Rubio and Jonny Flynn. Let it be noted that the Minnesota Timberwolves used the fifth and sixth pick to snag Rubio and Flynn. We know they are kicking themselves right now.
Curry is in his seventh season in the Association, has a league’s MVP and World Championship ring in his trophy case, along with multiple NBA records he’s continues to make. It is safe to say that Under Armour found a “diamond in the rough” in Curry and that gem is getting more valuable by each game played.