Under Armour's losing market share — and it risks falling behind New Balance (UA)

The company dealt with inventory problems for a period in 2017.
Competition may increase going forward, as strengthening brands enter markets Under Armour has a footprint in.

Not too long ago, Under Armour was the darling of the athletic apparel industry, and was viewed as a threat industry giants Nike and Adidas. But that was before the company's stock plunged by roughly 80% between mid-2015 and mid-2017. Now its at risk of falling into fifth place, behind New Balance.

"There are few $5 billion athletic brands in the global marketplace (let alone those that have surpassed that milestone)," Wedbush analyst Christopher Svezia wrote in a note to clients. "These brands also tend to have a broader product focus, embracing lifestyle more comprehensively, including Puma, New Balance and Asics."

Puma has historically been a straggler behind Under Armour, but recently passed it as the third-largest athletic brand. And that's not all. New Balance did roughly $3.8 billion in revenue in 2016, and $4.5 billion in 2017. It's on the doorstep of passing Under Armour as the fourth-biggest athletic brand.

How is the competition closing the gap? They've focused on non-athlete marketing campaigns and products, and Under Armour hasn't done much to match those moves, Svezia said.

And things could still get worse for Under Armour.

"Brands like Puma, Reebok, and New Balance appear to be ramping up efforts in areas where Under Armour is present," the note said.

Puma is looking take take market share in basketball.

"Puma appears to have a strong strategy in place to make inroads into basketball, which could steal share from weaker brands in the category like Under Armour," Svezia wrote.

And New Balance is trying to make an entry into the baseball market.

"Though Under Armour has its upcoming MLB partnership, New Balance is also going after the sport and one of the most important cities for all brands, New York," the note said.

Increased competition isn't the only major headwind the company has faced in the past year. Under Armour had issues getting its swelling inventory to sellers towards the end of 2017.

Svezia has a $14 price target on Under Armour, about 13% below where shares are trading Wednesday.

Under Armour shares are up about 8% this year.