Once loved momentum stock Under Armour is selling hard today, down 5.5 per cent.
UBS analysts Michael Binetti and Steven Strycula just slashed their rating to ‘neutral’ from ‘buy’.
Binetti and Strycula said a huge factor in their previous upgrade of the stock was its early spring apparel trends that were ahead of plan. But they believe early spring trends have decelerated leaving little room for a positive surprise in second quarter EPS estimates.
Moreover, Under Armour had gained market share from Nike on products in which the latter had raised prices too aggressively. Nike recently cut some of those prices leaving less room for Under Armour to gain market share.
“We believe a strong stock run, high valuation, and signs of decelerating trends leave less stock upside in the NT (near term).”
On the plus side however, sales could pick up again with product launches in the second half of the year which include Spine, UnderBra, ColdGear Thermo etc. In the longer-term though Binetti and Strycula are optimistic that the company can expand its market through new distribution and categories.
The analysts are maintaing their above consensus $2.45 EPS for 2012.
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