Vonage Shorts Out, Below Armour Has Lofty Ambitions
sâmbătă, august 14th, 2010Below Armour, Inc. (UAI) debuted on November 18, 2005 at $31. The maker of branded performance clothing is growing its manufacturer recognition via the use of hip brand promotion that’s 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 features a projected five-year annual earnings growth of 22.50% versus 14% for Nike. But on the valuation side, Below Armour is discounting in significant premium development above that of Nike. Underneath Armour is trading at 46.19x its FY07 along with a PEG of 2.75 versus 14.27x along with a PEG of 1.06 for Nike. Clearly, Underneath 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 above World wide web Protocol (VoIP) is an early entrant to the rapidly developing 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.
Higher advertising costs to acquire clients have hindered margins. Vonage may be the current leader because of its early entry into the VoIP business but I see the business facing a hard uphill climb as intense competition surfaces from major cable businesses and the Skype service from eBay (EBAY)
The reality is Vonage has to spend extraordinary money on acquiring buyers whereas for cable companies and eBay, there’s currently a considerable customer base to marketplace to. Vonage will soon understand this.
Hedge fund manager and also the host with the hugely well-liked ‘Mad Money’ show on CNBC said Vonage can be a “piece of junk,” which I’ve to concur with. And with Vonage currently trading down at $13, the industry may also view Vonage as over hype and not enough substance.
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