Vonage Shorts Out, Under Armour Has Lofty Ambitions

Under Armour, Inc. (UAI) debuted on November 18, 2005 at $31. The maker of branded performance clothing is growing its brand recognition via the use of hip brand promotion that is trying to wrestle away interest from the traditional buyers of Nike (NKE).

Under Armour has targeted the youth and athletic market where it competing with the established and strong Nike brand. Under Armour has a projected five-year annual earnings growth of 22.50% versus 14% for Nike. But on the valuation side, Under Armour is discounting in significant premium growth over that of Nike. Under Armour is trading at 46.19x its FY07 and a PEG of 2.75 versus 14.27x and a PEG of 1.06 for Nike. Clearly, Under Armour will need to perform to its lofty expectations going forward; otherwise, the stock will sell off. Nike is a superior value play.

Vonage Holdings Corp. (NYSE/VG) debuted on Wednesday at $17, the mid-point of its estimated IPO pricing range of $16-$18. The provider of Voice over Internet Protocol (VoIP) is an early entrant into the rapidly growing area of VoIP and presently has about 1.6 million subscribers but the company has yet to turn a profit. VoIP uses a broadband connection to make phone calls.

High advertising costs to acquire customers have hindered margins. Vonage is the current leader due to its early entry into the VoIP business but I see the company facing a difficult uphill climb as intense competition surfaces from major cable companies and the Skype service from eBay (EBAY).

The reality is Vonage has to spend extraordinary money on acquiring customers whereas for cable companies and eBay, there is already a significant customer base to market to. Vonage will soon realize this.

Hedge fund manager and the host of the hugely popular ‘Mad Money’ show on CNBC said Vonage is a “piece of junk,” which I have to concur with. And with Vonage currently trading down at $13, the market may also view Vonage as over hype and not enough substance.

Under Armour Shorts Style Comparison

There are four styles of underwear: bikini, brief, sport boxer and loose boxer. Lucky for men and women Under Armour has a product that is focused on the sport boxer feel. I have tried all of these and by far the best type is sport boxer. Bikini don’t cover enough front or back, they ride up and don’t keep the boys in place. Bikini style are not made for sports, enough said.

Briefs offer more coverage but don’t feel like they cover enough area, they allow chafing in the crotch to happen and are not that sexy to women. In addition briefs don’t offer enough room for the boys. Loose boxers are super comfortable, but only certain scenarios like laying by the pool all day. These ride up the instant you engage in physical activity and don’t flatter your body at all.

In high school I saw gang members wearing these all the time you know with their pants down to their ankles. That leaves the best option, sport boxer. Sport boxers support the boys, stay in one place, don’t ride up your butt, cover enough of the groin area and are tighter and therefore flattering on the body.

Under Armour calls them compression shorts or heat gear. These are very comfortable. They come in three colors black, grey and white. I prefer black or white. The elastic is very strong on them and does not wear out easily. When you are active these sport boxers flex and move with you unlike other styles that cut into you leg, butt or crotch areas. Sport boxers are similar to lululemon clothing in that they squeeze and shape the body bringing out the good features.