Under Armour: A stock just as hyped as its products
Today's Financial News - Posted March 20, 2009
I may be a fan of its products, but that does not mean I have to be a buyer of its stock. As usual, Under Armour’s (NYSE:UA) share price has wondered into extremely overvalued territory. Take action now and profit as the bears tear away at it.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): When you work or live in Baltimore you are not supposed to pick on beloved companies like Under Armour (NYSE:UA) that call the city home.
The company’s trendy product line and powerful brand image does not stop at its sweat-wicking clothes and colorful shoes. One of the company’s best-selling products cannot be bought in stores. You have to buy it on Wall Street.
Looking a chart of Under Armour’s stock price is like viewing at a graph of consumer sentiment. During the last six months, each time Americans thought the worst of this recession was over, shares rose and rose. But each time we got some proof that this recession is likely to be gravely different than the past, shares gave back their gains and more.
During the recent equities rally, Under Armour’s price rose from below $12 to almost $19 earlier today. The run was too much, too soon. Shares are already dropping and are likely to drop some more.
First Sirius, now Under Armour
I know I am starting to sound like a tired perma-bear, but even a typically optimistic investor like me cannot buy into a hype-filled rally like we saw this month. The Fed is printing incredible amounts of money. Congress is creating 90% tax rates. And the president is talking to Jay Leno about how he looks like a retarded bowler.
How is any of that supposed to make me want to put my portfolio on the line?
As I write, Under Armour is trading with a trailing P/E of over 22. Who knows how high that figure will be after we get the next quarterly earnings report? It is hard to believe the company will release figures anywhere close to deserving that kind of premium.
My first thought is to simply short this company and win as the market corrects its mistakes once again and share price drops. But there are more lucrative opportunities. For those, look to the options market.
Over at TFN Strategic Trader, we have been using the market’s mistakes to our great advantage. This is exactly the kind of opportunity we look to profit from. Under Armour is overpriced, its products are never going to fly off the shelves like most investors expect and the stock’s direction is controlled more by the company’s commercials than its fundamental value.
I am keeping this one on my short list.
Next Article: General Growth down to its last magic trick
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