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Brand Face-Off: Nike Inc vs. Under Armour Inc

Evaluating NKE and UA from technical and sentiment viewpoints

by 1/6/2014 1:06:56 PM
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Athletic apparel rivals Nike Inc (NYSE:NKE) and Under Armour Inc (NYSE:UA) are both long-term technical outperformers. On a year-over-year basis, NKE has advanced an impressive 47% to trade at $77.73, while UA has tacked on a brow-raising 76% to wink at the $86.63 level. For comparison's sake, during the same time frame, the broader S&P 500 Index (SPX) is up about 25%.

In addition, the two brands boast long-term support on the charts. Specifically, both have been ushered higher by their 20-week moving averages -- NKE since late 2012, and UA since early 2013.

Weekly Chart of NKE since November 2012 With 20-Week Moving Average

Weekly Chart of UA since March 2013 With 20-Week Moving Average

Nevertheless, Nike and Under Armour still face a high degree of pessimism. For starters, NKE's Schaeffer's put/call open interest ratio (SOIR) is lodged at 1.60, with put open interest outstripping call open interest among options with a shelf-life of three months or less. Also significant is the fact that the SOIR is higher than 85% of similar readings from the past year, meaning short-term traders have rarely been as put-focused toward NKE as they are now. Should these bearishly skewed bets begin to unwind, the shares could get a boost in the coming days and weeks.

Outside of the options pits, UA's short interest has grown to comprise over 10% of its total outstanding float. At the stock's average daily trading volume, it would take nearly 10 sessions to cover these bearish bets. In other words, there's plenty of sideline cash available to support another leg in the security's long-term rally.

Meanwhile, Wall Street is skeptical toward both performance brands. Of the 20 analysts covering NKE, only half rate it a "buy" or better, with the remaining half doling out tepid "holds." Also, the stock's consensus 12-month price target of $81.64 is a chip shot away from its current perch. It's more of the same for UA, which has received 19 "hold" or worse ratings from the brokerage bunch, compared to just eight "strong buys." Also, the equity's price target of $80.96 is well below the current price. In other words, both NKE and UA could potentially benefit from a round of well-deserved analyst upgrades and/or price-target hikes.

Therefore, when it comes to deciding a winner for this brand face-off, this matchup actually finishes with a draw. From a contrarian perspective, Nike Inc (NYSE:NKE) and Under Armour Inc (NYSE:UA) are each uniquely primed to benefit as the bears in the options pits and on the Street start to jump ship.

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