Analyzing four stocks with ties to Tom Brady: MOV, UA, DECK, and GIS
What could overshadow the Fed meeting, volatility in China, and the latest batch of big-time earnings reports? Chisel-jawed Tom Brady and "Deflategate," of course. After the NFL upheld a four-game suspension for the New England Patriots QB, Brady and Pats' owner Robert Kraft took to the media to chastise the league for failing to produce "hard evidence." Against this backdrop, we thought we'd do a Contrarian Face-Off featuring four companies with ties to the reigning Super Bowl champ.
According to Forbes, Brady raked in roughly $38 million in 2014, with around 18.5% of that coming from endorsements -- a list that includes watch maker Movado Group, Inc. (NYSE:MOV), athletic apparel issue Under Armour Inc (NYSE:UA), and Uggs parent Deckers Outdoor Corp (NYSE:DECK). He's also been seen on the sports throne that is the Wheaties box, owned by General Mills, Inc. (NYSE:GIS).
MOV vs. UA
MOV has struggled in 2015, surrendering 12.5%. Rebound attempts have been contained by the stock's descending 200-day moving average, currently docked in the $28 neighborhood. Meanwhile, MOV was last seen at $24.82, and could test support in the $23-$24 region, which has contained the security's dips since mid-2012. Plus, the stock's 14-day Relative Strength Index (RSI) sits at 32 -- on the cusp of oversold territory, suggesting a short-term bounce may be in the cards.
In light of the stock's struggles, it's not difficult to see why short interest remains elevated, representing nearly two weeks' worth of pent-up buying demand, at MOV's average pace of trading. Furthermore, analysts are on the fence, with all four brokerage firms offering up tepid "hold" recommendations.
UA, on the other hand, has skyrocketed more than 44.5% in 2015, and just touched an all-time peak of $98.91 today. In fact, the equity has outperformed the broader S&P 500 Index (SPX) by more than 28 percentage points during the past three months. Opposite of MOV, UA's 14-day RSI stands at 78 -- in overbought territory.
However, the sentiment surrounding UA doesn't necessarily reflect the stock's upward momentum. It would take more than nine sessions to buy back all the shorted UA shares, at the stock's average daily trading volume, and option buyers have picked up puts over calls at a much faster-than-usual clip during the past two weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.83 stands higher than 82% of all other readings from the past year.
Playoff Winner: Under Armour, Inc. (NYSE:UA). As the stock continues to barrel higher, a short squeeze or an unwinding of pessimism in the options pits could add fuel to UA's fire. Movado Group, Inc. (NYSE:MOV), on the other hand, has yet to inspire a mass exodus of bears.
DECK vs. GIS
DECK hasn't been much to write home about this year, with the shares down 24.3% to sit just south of $69. Supporting the stock has been the $68-$70 region, while upside momentum has stalled in the $75 neighborhood. The equity's 14-day RSI sits at a paltry 34.
Off the charts, DECK will step up to the earnings plate tomorrow night. Ahead of earnings, short sellers upped the bearish ante by 7.9% during the most recent reporting period, and these bearish bets now account for 16.2% of the stock's total float -- about 11 times DECK's average daily volume. Analysts, on the other hand, have an average 12-month price target of $85.12 -- in territory not charted since January.
GIS has added 7.8% in 2015, and is within striking distance of its all-time high of $57.98, tagged earlier this month. Pushing the stock higher has been its 10-month moving average, which has ascended into the $54.50 area.
While option buyers have initiated bullish bets over bearish at an accelerated clip -- GIS' 10-day ISE/CBOE/PHLX call/put volume ratio of 5.13 registers in the 85th percentile of its annual range -- Wall Street hasn't fully bought in. In fact, just four analysts offer up "buy" or better endorsements, compared to 10 with "hold" or worse ratings. Plus, the consensus 12-month price target of $56.64 sits at a discount to GIS' current price.
Playoff Winner: General Mills, Inc. (NYSE:GIS). As with UA, the stock seems to be the underdog where sentiment is concerned, yet continues to flirt with record highs. A capitulation to the uptrend in the form of upgrades and/or price-target hikes could push GIS even higher. Deckers Outdoor Corp (NYSE:DECK), meanwhile, could enjoy a short-covering spree, but only if the shares break out of their range and/or the company unveils much stronger-than-expected earnings.
Super Bowl Champ is…
While it's not clear if Brady's endorsement contracts have moral clauses, or if there will be any financial fallout from the NFL suspension, some speculate that his turn as a benchwarmer could impact NBC -- owned by Comcast Corporation (NASDAQ:CMCSA) -- which is airing the season opener between the Pats and the Steelers on Sept. 10.
However, even if his corporate partners aren't as supportive as Kraft & Co, Tom can rest easy knowing his wife practically prints money with every unnaturally symmetrical smile. That said, we're just gonna crown Gisele Bundchen the winner of the entire world, because -- as Cincinnati Bengals fans might tell Pats supporters -- life isn't fair.