In a recent report, analysts at Deutsche Bank discussed meeting with the management team at Under Armour Inc UA 0.37% that included CEO Kevin Plank. The report included a list of five reasons why Deutsche Bank is bullish on Under Armour.
Deutsche Bank has a Buy rating on Under Armour and an $82 price target.
1. Higher Prices On The Way
Despite the belief that sales prices could be headed lower in the space overall, analysts believe that Under Armour’s average sales prices (ASPs) could be on the rise. They see this increase driven by a rise in more expensive non-cleated shoes and an overall push toward innovative new products with higher price points.
2. Connected Fitness On The Rise
Under Armour’s wearable products are seeing growing demand, and the company is aggressively pursuing the space via a series of recent acquisitions, including Endomondo, MyFitnessPal and MapMyFitness. Analysts believe “it’s too early to predict the payback of these acquisitions,” but note that the costs of the transactions are “already in plan.”
3. Footwear Transitioning “From Good To Great”
Footwear has been a strong source of growth for Under Armour, but management believes there is still plenty of room for improvement. Analysts point out that design could be a possible area in need of investment for Under Armour, as the company currently has only one designer devoted to women’s and youth footwear. A single designer is a stark contrast to Nike Inc’s NKE 0.96% team of hundreds of designers.
4. International Opportunities
The company is currently in “investment mode” when it comes to international business. The European expansion is particularly promising and, according to management, would likely have become profitable in 2015 if not for the strength of the dollar.
5. Direct-To-Consumer (DTC) E-Commerce Growth Potential
Analysts see potential to increase e-commerce revenue to the point where it reaches up to 25 percent of total revenue.
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