Under Armour (NYSE: UAA) stock is underperforming the stock market year-to-date, with 12% gains vs. 20% for the S&P 500 index. If anyone can resuscitate a lagging stock, it’s Richard Branson, the billionaire entrepreneur behind space exploration company Virgin Galactic. Branson turned to Under Armour to design the spacesuits that will eventually take him and hundreds of adventurous tourists into space on the first commercial flight of its kind.
Those space tickets run $250,000 a pop. And while tens of millions of dollars have poured in so far, Under Armour is either expecting great things from the economy or it’s targeting the 1%, the latter of which probably won’t do much to bolster the company’s revenues. Under Armour’s North American sales have been on the decline in 2019 while chief rival Nike has been generating revenue hand-over-fist.
Branson told CNBC the suit is designed to “be comfortable, flexible, strong, dealing with slightly colder weather and hotter weather, and we also wanted it to be sexy and look good.”
If today’s stock market reaction is any indication, the spacesuits, while impressive, aren’t enough to send Under Armour stock to new heights. The truth of the matter is the deal is likely to do more for the space travel industry than it is the company making the space travel suits.
For instance, it’s a reminder to tech entrepreneur Elon Musk that he’s not the only one with a horse in this race, which incidentally could explain what put a fire under his feet to go on a hiring spree at his space exploration startup, SpaceX. Musk’s company plans to launch another 30,000 satellites into space for its Starlink project designed to deliver satellite-fueled internet service.
Under Armour might not be as big as Nike but it’s still a major brand that’s not going anywhere. Chief executive Kevin Plank has made strategic moves in recent years to differentiate is company as a performance-based player in the athletic attire arena, a market in which Under Armour has about 5%, analysts say. They are leaner and meaner with a renewed focus on their defined market. We’ll know more when Under Armour reports its third-quarter earnings results, and while the Branson-effect might not have been able to bolster the stock price, it’s a positive endorsement from a fellow CEO who is breaking new ground, and that’s not too shabby.
Last modified: January 10, 2020 3:29 PM UTC