Popular activewear stocks have really taken a beating over the past several months, led lower by such names as yoga top dog Lululemon (NASDAQ:LULU), which is now down a whopping 34% from its late-2023 high, and sneaker behemoth Nike (NYSE:NKE), down 48% from its late-2021 peak.
Undoubtedly, the period of weakness has caused some to draw comparisons to perpetual apparel underperformer Under Armor (NYSE:UA), which is off more than 85% from its 2016 all-time high. Such comparisons may be unwarranted, given just one quarter (in the case of LULU stock) or two years (for NKE stock) isn’t really a long enough timeframe to judge a company and its long-term growth thesis.
As valuations come in and both activewear firms tread water, investors may wish to give the broader industry a look if what they seek is either next-level growth or deep value. Let’s check out a trio that’d probably be more appealing to the value and growth crowds as we head into a period of seasonal strength.
Under Armor (UA)
First, we have Under Armor, which as noted above, has been under serious pressure in recent years. Given the magnitude of the company’s woes, I think it’s quite a stretch (pardon the pun) to refer to yoga wear firm Lululemon as the next Under Armor, especially since it was just one quarter that had investors throwing in the towel.
With shares close to all-time lows (not a term we hear all too often), UA stock may be the ultimate deep-value play for those who believe in the brand and its turnaround prospects. With founder Kevin Plank making his return to the company as CEO, the firm may just be able to return to its roots as it looks to fire back at the likes of rivals like Nike and even Lululemon.
Indeed, competition in activewear can be so fierce these days. With a focus on investing only in the most promising growth drivers (such as footwear and women’s wear), I do think Plank’s return could be a rewarding one for UA stock investors.
At just 1.28 times price-to-book (P/B), expectations seem low enough that a modest earnings surprise could be enough to spark a significant upside move.
On Holdings (ONON)
From value play to disruptive grower, we have On Holdings (NYSE:ONON). A relative newcomer to the footwear scene, it has competitors like Nike feeling as though they were caught flatfooted. With ONON stock more than doubling off its 2022 all-time lows, it seems like the Swiss-based firm is the hot activewear growth stock to own. Indeed, there’s a lot of ground to gain if On Holdings can execute on its growth strategy.
With the ambitious plan to open 100 new stores while also expanding the non-footwear side of the business (apparel), the tables certainly seem tilted in On Holdings’ favor.
If the company can gain strides in apparel as it has in running shoes, there’s no telling how much ground the ONON stock could gain as industry heavyweights feel the pinch of the tougher macro environment and amped-up competition. My guess is the apparel push will pay off now that its emerging brand has grown more recognizable in recent years.
At 39.6 times forward price-to-earnings, ONON stock has a great deal of growth priced in already. Perhaps waiting for a bigger pullback would be most prudent for those seeking growth at a more reasonable price.
Gap (GPS)
Gap (NYSE:GPS) may not be an activewear pure-play, but it has runway to gain in the space, with brands like Athleta for high-end yoga wear and some of the cost-conscious options in athletic apparel under the Old Navy brand.
The apparel retailer behind various well-known apparel brands has been under serious pressure in recent years, shedding more than 78% of its value between its 2021 peak and the more recent 2023 trough. Since bottoming out last year, the stock’s been skyrocketing, now up 189%.
Though the momentum has reversed course in recent weeks, with shares plunging over 21% from 52-week highs of around $28 per share, I’m inclined to view GPS stock as more of a bargain right here. Shares are trading at 16.8 times trailing price-to-earnings (P/E). Why?
The latest round of earnings were pretty good, with Old Navy and Gap moving into a profit despite tough macro conditions. As Athleta continues building brand affinity following its recent slump, I do think GPS stock is a play to stash on one’s radar.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.