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Under Armour Gaining Traction in Asia-Pacific, EMEA
Under Armour’s (UAA) efforts to grow its international business have begun to pay off, with overseas revenue up 35% YOY (to $305 million); including a staggering 52% increase (to $130 million) within the Asia-Pacific region. Much of that growth can be attributed to China, a market UAA believes has billion-dollar potential for the company — perhaps not unrealistic if you consider the Chinese government intends to grow its domestic sports industry to $750 billion by 2025. The company also launched its brand in India earlier this year. EMEA revenue grew +22% YOY to $128 million. It’s worth noting for comparison purposes that while UAA generates just 25% of its gross revenue outside of North America, Nike (NKE) and Adidas (ADDYY) generate nearly 60% and 80%, respectively, overseas.
Howie Long-Short: When Under Armour shares dropped 24% following the release of disappointing Q3 earnings report (the company’s biggest single day drop in history). Short-sellers made $251 million in market-to-market profits; bringing the total to nearly $1 billion YTD. Easy money for those that read Piper Jaffray’s biannual Taking Stock of Teens survey (or read JWS daily); UAA was once again named the No. 1 company teenage males perceive as an “old brand”, one they will no longer wear. Shares of the company are down 55% YTD.
Fan Marino: Under Armour’s fastest-growing segments aren’t sneakers and apparel, but connected fitness (+16% YOY to $23.4 million) and licensing (also +16% YOY). While the revenue generated by the new technology division remains diminutive relative to the company’s total Q3 revenue ($939 million), the growth has encouraged UAA to further invest in products and initiatives related to digital health and fitness. CEO Patrik Frisk said the company intends to use the connected platform and data collected from the software to “sell more shirts and shoes.” The company will be releasing its first smart shoe, with HOVR foam technology (new cushion technology), in February 2018.
SCOTUS Hears NJ’s Case for the Legalization of Sports Gambling
The SCOTUS heard New Jersey’s case (vs. NFL, NBA, MLB, NHL & NCAA) to strike down a federal law requiring individual states to maintain sports gambling prohibitions on Monday, with most of the judges appearing to agree that Professional and Amateur Sports Protection Act (PASPA) is unconstitutional. The state argued that PASPA runs afoul of the 10th Amendment; infringing on state powers not delegated to the federal government. The leagues argued that an expansion of legalized gambling threatens the integrity of their games and that the law prohibiting legalized gambling on the state-level requires no affirmative action on the states’ behalf. Should the SCOTUS vote in New Jersey’s favor (South Point Casino has NJ as a 4-1 favorite), as many as 32 states (at least 18 have publicly supported NJ) could offer sports gambling within 5 years. A decision isn’t expected until June 2018.
Howie Long-Short: NBA owners are well positioned to cash in, should SCOTUS side with Governor Christie. The league has a 6-year $250 million partnership in place with Sportradar to handle real-time data distribution, data that enables overseas sportsbooks to set odds and take action on in-game bets. Should stateside gambling become legalized, NBA owners can expect the value of that data to soar. Mark Cuban, Michael Jordan and Ted Leonsis (via Revolution Growth) have all independently invested in Sportradar, along with EQT Partners; a private equity firm. You can play Sportradar through the industrial holding company Investor AB (OTC: IVSXF), an anchor investor on all EQT funds.
Fan Marino: Legalized sports gambling will ultimately spell the end of daily fantasy sports, but it won’t be because fans are placing bets on traditional point spreads and over/under totals (though they will be doing that, too). In-game running (or live betting) is the biggest threat to DFS, as it enables fans to place bets after every single stoppage of play; with the odds changing in real-time. U.K. based online gambling company Bet365, which has 19 million users in 200 countries, reported $2.8 billion in revenue over the last 12 months; 73% of that came from live betting.
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Reasons to be Optimistic About the Future of Major League Soccer
U.S. soccer failed to qualify for the 2018 World Cup and MLS television viewership figures remain minuscule (272,000/game on ESPN), but there are reasons to be optimistic about the future of America’s top level soccer league. MLS teams averaged more than 22,000 fans/game (a 60% increase from 2000) in 2017; 7th among global soccer leagues and comparable attendance to that of Italy’s Serie A league. A 2nd team will begin play in Los Angeles next season and the league is preparing to award 2 new expansion franchises (Cincinnati, Detroit, Nashville & Sacramento) scheduled to begin play in 2020. Fourteen of the league’s 23 teams have soccer specific stadiums (with 3 more under construction) and player salaries are on the rise. Some top American teens are still choosing to go overseas (see: Christian Pulisic and Josh Sargent), but it is worth noting that more than 250 players who played at MLS youth academies since 2007 have earned first team league contracts.
Howie Long-Short: Adidas (ADDYY) anticipates sales of the company’s soccer jerseys will increase in 2018, boosted by the sponsorship of 3 World Cup tournament favorites (Germany, Spain and Argentina). Eleven (up from 9 at ’14 WC) of the 32 teams competing in Russia (including the host country) will be wearing ADDYY kits, the most of any apparel provider; Nike (NKE) has 10 teams (also had 10 at ’14 WC). Adidas has ensured it will see significant exposure at the ’18 tournament, even if the teams it sponsors are eliminated early; the company is the manufacturer of the official match ball.
Fan Marino: MLS’ Board of Governors is going to award MLS franchises to 2 cities later this month; Cincinnati, Detroit, Nashville and Sacramento are the finalists. Representatives from each will meet in NYC on Wednesday, to plead their best case in front of the league’s expansion committee. The committee will then meet with the balance of the league’s owners; with a decision expected shortly after the board’s scheduled meeting on December 14th. I should point out that Toronto FC is playing Seattle for the MLS Cup, Saturday at 4p EST on ESPN.
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What is JohnWallStreet?
JohnWallStreet is not a person or location, but a destination for the educated sports fan.
While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related finance news, in easily digestible bites, with commentary from both the equities analyst and sports fanatic perspectives.
We’ll cover publicly traded professional teams & stadiums, television networks, apparel & footwear companies, equipment companies, ticketing companies, content and facilities providers. If it trades on Wall Street, and has a sports angle, it’s in our wheel house.
Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.