Under Armour (NYSE:UAA) stock is up more than 50% over the past year, and with good reason. When the athletic-apparel specialist announces fourth-quarter results later this month, its current guidance predicts that full-year 2014 revenue and operating income will have increased 30% and 31%, respectively. Under Armour's most recent earnings report in October marked its fourth consecutive quarter of 30%-plus revenue growth, and its 18th consecutive quarter of achieving at least 20%.
However, much of Under Armour stock's increase in 2014 came through wild fluctuations early in the year. In fact, Under Armour shares have actually fallen slightly from their post-earnings pop after the company's stellar second-quarter results in July:
So are investors finally becoming skittish with Under Armour stock's lofty valuation? Or is this just another pause before shares resume their upward climb?
While there are no guarantees in the world of investing, I think long-term shareholders will find the latter scenario much more likely for at least three reasons.
1. A burgeoning international presence
First, revenue from Under Armour's international business jumped 99.7% for the for first three quarters of 2014 but still only represented around 9% of Under Armour's total sales over the same period.
This is encouraging on two different levels. First, over the short term, it means Under Armour won't significantly suffer as a result of recent foreign currency pressures that have hurt its more globally based competitors. Only last month, for example, Nike shares fell even though the much larger company easily outran analysts' expectations with its own quarterly results. The primary culprit in that case was weaker-than-expected futures orders after accounting for the negative effects of foreign exchange -- a temporary problem for Nike, of course, but a problem nonetheless in the eyes of our short-sighted market.
But more important for Under Armour investors are the long-term implications. While Under Armour currently generates less than a tenth of its revenue overseas, international markets last quarter represented just over half of Nike's roughly $7 billion in total Nike Brand sales. For perspective, Under Armour's most recent guidance calls for full-year 2014 sales of "just" $3.03 billion. If Under Armour can ultimately achieve a similar split while continuing to grow its domestic business, it's apparent the company's runway for international growth is absolutely enormous.
2. Continued progress in mobile apps
Next, Under Armour is continuing to make strides in what it calls its "Connected Fitness" business. The most notable recent progress came earlier this month in the form of its new UA Record fitness app, which not only allows users to track their own fitness through thousands of connected devices, but also adds a social aspect by enabling them to invite friends to compete in a variety of fitness challenges.
This is also Under Armour's latest effort at building a 100 million-user fitness community, which effectively began with its $150 million acquisition of fitness app maker MapMyFitness just over a year ago. MapMyFitness, for its part, had already fostered an impressive 20 million users from its founding in 2006 up until the acquisition. As of the end of last quarter, Under Armour had grown that figure to 30 million. It's still too soon to tell just how much UA Record can contribute to that growth, but it's worth noting that early users have so far granted it a respectable 4.5 stars out of five on both Apple's App Store and Google Play.
It's also unsurprising that the UA Record app has a "Shop" tab to bolster Under Armour's e-commerce platform. But that's not Under Armour's end-game. Instead, by building an active community of tens of millions of people, Under Armour is also securing both loyalty from and rapport with those consumers to ensure the company's long-term success.
3. Methodically targeting younger consumers
Speaking of which, Under Armour is also methodical in building its brand to appeal to younger consumers. I first touched on this topic in mid-2013 after watching in awe as my daughter -- without my prompting, mind you -- gravitated toward a pair of Under Armour shoes in our local sporting-goods store while paying little attention to the brands surrounding them. As it turned out, I learned that Under Armour's broader marketing efforts focused heavily on promoting elite high school and college events, and continue to this day to feature no shortage of products geared toward youthful patrons.
Better yet, Under Armour is about to ramp its youth efforts even more going forward. Under Armour CEO Kevin Plank elaborated in his most recent earnings conference call:
Our Youth business is absolutely on fire. Year to date, we're the No. 2 youth shoe in all of sporting goods. And frankly, we're doubling down our investment. We've done this really with limited resources and haven't really put as much effort behind it as the momentum and the success has really called for.
In the end, if Under Armour has achieved relative dominance in youth footwear without "much effort," imagine what it'll be able to do once it really starts fighting for market share.
All things considered, these three catalysts certainly aren't the only opportunities Under Armour has to grow its business and, in turn, its stock price. But even taken in isolation, they're more than enough to convince me that patient, long-term shareholders will ultimately be pleased they held on.
Steve Symington owns shares of Under Armour. The Motley Fool recommends and owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.