Under Armour: Desperate for attention
Today's Financial News - Posted April 15, 2009
Sometimes you learn all you need to know while watching the morning news. When I saw Under Armour (NYSE:UA) panning for publicity this morning, I knew my beliefs were confirmed. Shares are about to make a big drop.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Under Armour (NYSE:UA) is doing what it does best, using marketing glitz to gain the attention of consumers and investors. As I have said countless times before, it is not a sustainable business model.
While slurping down my morning bowl of cereal, I typically watch something with a bit more grit than NBC’s Today Show (even Screech on Saved by the Bell offers more intellectual value), but my wife had the day off work and somehow gained control of the remote.
I am glad she did, because as soon as I saw Under Armour’s founder Kevin Plank chatting about his company’s “unique” product offerings, I knew my recent preachings were dead-on accurate. This company is getting desperate.
If you follow Under Armour, you know its products, while popular, are certainly not unique. Lower-priced competitors have been busy knocking away the company’s foundation one brick at a time. Plank and his company were hoping for a huge launch of their footwear line, but have failed on several different attempts to gain the attention the company needs to meet shareholder expectations.
Share price won’t need running shoes
In less than two weeks, investors are in for the wake-up call they need. When the company releases its latest earnings figures, Under Armour’s overvalued shares, with a P/E of 23 and all, will get cut to where they belong. I am prepared to see shares drop to $14 or less on news sales were nowhere close to investor-expected levels.
Yesterday’s retail sales figures were a foretelling of what’s to come.
Now, please do not get me wrong. Under Armour is a fine company, managed by a top-notch team. But that does not mean shares need to be trading for such a premium. The company’s days of high-flying growth are well in its past.
When the economy recovers, consumers will have moved on to the next fad. Under Armour will be left wondering where everybody went.
If shares dip as low as I thing they will later this month, you could be handed a strong buying opportunity. Under $14, shares of UA are a buy. But grab them at anywhere close to today’s prices, you will be sorry.
After all, when was the last time you saw a strong company like Exxon Mobil (NYSE:XOM) or McDonalds (NYSE:MCD) begging for publicity from Matt Lauer.
I guess it’s true. Sometimes “fluff” news shows do have some value. You just have to know how to find it.
Next Article: Let ignorance steer you to profits
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