- Goldman Sachs is throwing some cold water on Under Armour (NYSE:UA) noting that following a meeting with co's management last week they came away thinking that the pressure to sustain the company's growth profile may be beginning to take a toll. No question the opportunity is sizable when compared to brands such as Reebok, adidas, or Nike. However, the expectations, as reflected in the lofty valuation, surrounding how quickly UnderArmour can grow appear unrealistic. Investors seem focused solely on sales, overlooking two recent expense related downward estimate revisions.
GSCO believes the probability of upside to FY07 estimates has declined, and long term perspectives have not fully factored in emerging execution risks. They believe shares will face pressure heading into the back to school. Firm notes they see a fine line between brand enhancement and brand exploitation and have become more concerned that investors are not being compensated for these risks. Tgt is lowered to $45 from $50. Maintains Neutral.
Notablecalls: While I'm not entirely sure GSCO's right here about UA, the call will do damage to the stock. Would not be surprised to see UA in the low 40ies in a week or two. I continue to think UA's one the co's you buy after they stumble. Unlike say CROX, UA seems to have sustainability.
GSCO believes the probability of upside to FY07 estimates has declined, and long term perspectives have not fully factored in emerging execution risks. They believe shares will face pressure heading into the back to school. Firm notes they see a fine line between brand enhancement and brand exploitation and have become more concerned that investors are not being compensated for these risks. Tgt is lowered to $45 from $50. Maintains Neutral.
Notablecalls: While I'm not entirely sure GSCO's right here about UA, the call will do damage to the stock. Would not be surprised to see UA in the low 40ies in a week or two. I continue to think UA's one the co's you buy after they stumble. Unlike say CROX, UA seems to have sustainability.
You were correct about the reaction. I've been following Under Armour and am worried that any slowdown in consumer spending will have a big multiple compression effect on the stock. Growth has to continue to be tremendous to justify the price here IMO. I'm anxious to see your further thoughts on this name.
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