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Under Armour, Inc. Message Board

  • threedeedong threedeedong Jan 25, 2013 5:21 PM Flag

    Should longs be concerned about firing of VP of shoes division?

    Why would they fire someone high up just before earnings? And wasn't the shoes business the reason it's gone up so much the last 1-2 years?

    Anyone care to comment?

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    • The margin of safety is no longer with this stock. As someone who basically has been around since the inception of this stock's outperformance, I can exlain the mindset of why it was a worthy investment during that time(minus a handful of the last few months) and why it no longer is compared to other companies.

      The reason we flew up and outperfromed the market and virtually most companies if not all in the retail sector is UA was a wall street darling for a year and a half from its IPO till the crisis. Like Lululemon these last few years, UA flew to levels that were just ridiculous before the crisis hit.

      As I keep trying to explain to the board, it is all about margin of safety. Lululemon doesn't offer margin of safety at this level as they have a lot to prove yet their valuation projects as if there will be no misses. It is an impossible line for companies to follow and most mess up and cross it eventually and the total return comes out to mulch or negative despite impressive run-ups.

      I can show you Apple, Deckers, and any number of other companies that fail to realize irrational market expectations. Once those companies miss or mess up, you see that cliff develop on a chart and just erase all the hard work.

      cont.

      • 2 Replies to indian8788
      • One concern all longs should have is that even with the recent selloff, the stock is still trading at 32x forward earnings. Any slip-up/growth slowdown and this thing has the potential to be punished, severely.

        The shoe debacle seems to be just that slip-up and it will be difficult to regain investor confidence after FUBARing it so badly.

        A miss, any miss would likely send this to new 52 week lows at which point there will be prolong price discovery and fund selling to find a good price (see AAPL from 700 - 440 most recently).

        If I were long I would GTFO or seriously consider buying lots of puts into next month, but even that would be a losing proposition when this thing tanks 20% after ER.

        Sentiment: Sell

      • It does not mean the company is bad, unprofitable, etc. It just means that the valuation before the news coming was too high and once the bad news comes, EVERYONE wants to get out of the same door. But just as in a burning building, there is usually no one running in except the firemen and plenty of people running out to safety, so too with stocks.

        Apple is a great company and a certain price, with that beautiful cash sitting in the bank, the company giving a generous and likely more generous dividend in the future, the price becomes comelling again. So too as I have shown with Netflix and am now proving AGAIN with DECKERS.

        See, companies ofter run-away from their proper valuations and the MARGIN OF SAFETY(what you can lose) gets smaller due to the higher pressure on the company to beat each and every earnings reort due to the increasing expectations due to the higher valuation.

        The first sign of not being able to meet those expectations, the market cuts you out. You are no longer a darling, you have proven "unreliable" and no longer given the benefit of the doubt and therefore the price must reset to a good enough margin of safety to make the investment worthy of investors again.

        cont.

 
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