Footwear is an important growth opportunity for Under Armour, one that has taken a lot of upfront investment to make it grow as much as it has. Image source: Under Armour.

Under Armour (NYSE:UAA) (NYSE:UA) shares have fallen nearly 20% in the week following the release of its third quarter earnings. The company reported sales up 22% year-over-year and earnings up 28%. But Wall Street was not impressed, especially by comments from CEO Kevin Plank that indicated the company would probably fail to meet previously stated income goals for 2018 due to heavy investments.

Though the sports apparel company will certainly face increasing challenges in the coming years, the short-sightedness of this sell-off could be a great opportunity for long-term investors looking for a bargain on a great company. 

Why the market punished Under Armour

While the company logged its 26th straight quarter of year-over-year revenue growth topping 20%, growth was down slightly from the 28% logged in the last quarter. Profit did jump 28% year-over-year, compared with a 58% decline in the prior quarter due to a major writeoff following the bankruptcy of Sports Authority, which was an important retail partner. 

By segment, there were some highlights that stood out for long-term growth. Apparel sales slowed, but its 18% year-over-year gain is still impressive for a segment that makes up more than two-thirds of the business. Footwear grew 42%, and international sales, following the summer Olympics, grew 74% year-over-year. 

Regardless of what seemed like solid results for the quarter, the market has punished Under Armour shares, as gross margin fell from 48.8% to 47.5% and apparel sales growth fell in North America. However, the biggest concern seemed to be Plank's comments that he expects the company to still reach its previously stated sales goal of $7.5 billion by 2018, but he no longer expects to meet the earnings goal of $800 million by the same deadline.

Playing the long game

During a post-earnings interview, Plank said that sometimes people pay too much attention to margins, meaning that while Wall Street is focused on short-term earnings growth, he's leading his company for long-term growth by investing heavily in the future. He says that Under Armour is focused on "getting big fast", particularly by making heavy investments in digital growth, building out long-term projects such as advanced manufacturing and creating demand through important sponsorships.

Recent costs have been high -- there is no doubt about it. This past summer, Under Armour unveiled its Lighthouse manufacturing innovation center. This 35,000 square-foot facility is filled with 3D printers, automated manufacturing equipment, and a team of designers and engineers with the sole focus of making better gear in more innovative ways. Plank believes this will eventually lead to local manufacturing at a fraction of the cost.

Under Armour's new heart rate monitoring headphones. Image source: Under Armour.

Then there are the expensive investments in digital growth, including building out and upgrading Under Armour's suite of mobile apps, such as MyFitnessPal and Record, which now have nearly 190 million users -- the company is also creating new tech products to go along with them. Most recently, Under Armour showcased its new heart rate monitoring wireless headphones.

Finally, there is Under Armour's big name sponsorships, which have also grown massively in recent months. The company announced a 15-year deal with UCLA earlier this year, which at $280 million was the largest college sponsorship deal ever. In late October, it was leaked that Under Armour is officially going to be the uniform provider for Major League Baseball beginning in 2020, as reported by Sports Business Daily.  

This overreaction could be your chance

In weeks before the earnings release, analysts at both Piper Jaffray and Wells Fargo upgraded Under Armour stock, citing its ability to deliver long-term growth and momentum in footwear and international sales. Following the recent earnings report, various firms downgraded and/or lowered their price target on the stock, helping to push shares lower. However, those original reasons the analysts had upgraded the stock still very much hold true.

For investors willing to look past 2018, this could be a chance to buy into this fast-growing company at its lowest levels since 2013.

Seth McNew owns shares of Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool owns shares of and recommends Under Armour (A Shares) and Under Armour (C Shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.