Jordan Spieth, the 21-year-old golf phenom who just won The Masters, is sponsored by Under Armour.
In January, the company locked up Spieth to a new 10-year deal and it is already paying off.
In a note to clients on Friday, analysts at Piper Jaffray wrote that following Spieth’s win, the sale of Under Armour’s golf merchandise has accelerated.
As a result, the firm raised its price target on Under Armour to $US93 from $US90. So Spieth’s Masters win is worth, in Piper’s view, $US3 per share for Under Armour.
There are 218 million Under Armour shares outstanding, so another way to think of this is that Spieth’s win is worth around $US654 million for the company.
We are reiterating our Overweight rating on Under Armour following a round of store checks illustrating the accelerating momentum of the golf business since Jordan Spieth’s Masters win last weekend. Simply stated, golf is one the fastest growing categories for Under Armour and we believe it can double, while growing well in excess of the overall brand, and reach more than $US400M in the next few years. To wit, UA golf search volume during the Masters increased 8.9x compared to 2015 before the Masters — well ahead of the peer average of 1.8x. While we are not changing our estimates, we are raising our FY16 EPS multiple from 60x to 62x to reflect recent brand strength and our PT moves from $US90 to $US93.
The model for Spieth’s impact on Under Armour’s sale is Nike and Tiger Woods.
Piper notes that Nike signed Spieth at a “near identical” point in his career to Tiger, and over the next decade, Nike’s golf sales grew at a 15% compounded annual growth rate to $US700 million in 2008 from $US120 million in 1997.
And so over the next three years, Piper thinks Under Armour’s golf business can grow from around $US200 million today to $US400 million.
More broadly, Piper is bullish on Under Armour’s selection of star athletes to endorse.
We are increasingly impressed with the knack for athlete selection displayed by UA. In our view, the company has done a commendable job identifying and locking in young talent just ahead of major successes before the cost of their service soars. Spieth and Stephen Curry are the best examples given they are tracking toward becoming the faces of their sports for the next decade, but we believe the company has a deep roster (over 500 athletes in North America) of other emerging stars.
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