Why Shares of Under Armour, Inc. Were Looking Weak

Is this meaningful or just another movement?

Jeremy Bowman
Jeremy Bowman
Apr 24, 2014 at 2:25PM
Consumer Goods

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Under Armour, Inc. (NYSE:UAA) were coming up short today, falling by as much as 10% despite a strong earnings report as management hinted at a possible slowdown in sales growth on the earnings call. 

So what: The sportswear maker easily beat analyst estimates in another blowout quarter. Earnings came in at $0.06 a share following its split earlier this month, ahead of the consensus at $0.04, while revenue jumped 36% to $642 million, crushing expectations of $598.2 million. Shares were actually up in pre-market trading, but dipped when management said they saw sales growth slipping over the course of the year and that it would be a little behind last year's pace by the fourth quarter. 

Now what: Today's sell-off seems like more of a reflection of the high stock price rather than the company's performance, and looks like a textbook Wall Street overreaction, punishing a company for a strong quarter because it didn't raise guidance proportionally. Under Armour actually lifted its full-year revenue outlook by $40 million to $2.88 billion-$2.91 billion, equal to 24%-25% growth, and sees operating income growing by 25%-26%. Shares are certainly pricey at a P/E of 65, but I see no reason to sell after such a promising start to the year. Investors looking for a buying opportunity may want to take advantage of the dip.