If UA is good enough for the Marines, it is good enough for me, however, with Under Armour set to report in a week (October 30th), the Bears have begun their dirty work. A “hit” piece appeared in the Wall Street Journal today that underscored the fact that big Hedge Fund money are short this stock. More than 17% of UA’s shares outstanding are currently short.
All the code words like “slowing economy” and the “consumer is dead” appeared to make bulls blink in what has undoubtedly become a battleground stock over the last six months. In fairness, the bear’s case is that the current forward P/E is unsustainable and that revenue growth is due to slow sooner rather than later. The bulls see that UA has just a small sliver of the US footwear market and only a small percentage of the worldwide sports apparel market.
So far, the bears have been wrong, but quarterly earnings may prove different if revenue is slowing as drastically as a Chief Retail Analyst at SportScanInfo was quoted as saying. The fact that the bears are paying for this analyst’s research was, of course, not revealed (this is something that I suspect, but don’t know for sure). UA posted 42% revenue growth in Q1 and 50% growth in Q2. It is my take that UA would have to miss badly with those first half numbers for the stock to crater given the pullback it has already had.
Regardless, my current plan with UA is to wait on the sidelines for earnings before potentially piling in again. That is what the big money managers do (keeping earnings uncertainty out of their portfolios). In this case, it may be the way to go.
I live in Maryland, the home of UA. My store checks don’t see what the bears see, but my checks have been limited to two malls in the local area over the last 90 days. This may not be reflective of the country.
The hit piece may work in the short term. It was enough to keep me on the sidelines. It may cause longs to sell their shares. If that happens, I may get shares cheaper which is not a bad thing.
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