It’s been an exciting few weeks for sports fans with the Stanley Cup, NBA finals and now the World Cup. The same can also be said for sports apparel company Under Armour. That’s because the stock has done anything but sit on the sidelines.
Under Armour’s shares are up more than 25 percent in the past month alone, on a five-day winning streak and absolutely crushing the competition. Nike shares have been flat in the past month.
But has the stock run a bit too far too fast?
“Under Armour has been the Lionel Messi of retail stocks,” joked MKM Partner’s Chief Market Technician Jonathan Krinsky. (For those who aren’t soccer enthusiasts, Messi lead Argentina to a win against Bosnia-Herzegovina in the World Cup over the weekend.) Based on the charts, Krinsky believes Under Armour could get to $75 per share in the next year or two.
But, while Krinsky is a long-term believer in Under Armour, he isn’t ready to jump in just yet. His suggestion: Wait for a pullback to around $50 per share to get long. That’s where the stock has responded in the past as it represents the bottom of a past “rising wedge.”
Yet, although the charts point to a bit of a roller-coaster ride, and perhaps opportunity for nimble traders, the fundamentals are less optimistic, at least according to Erin Gibbs of S&P Capital IQ. She says the stock’s valuation and volatility around earnings make it difficult stock for retail investors to buy.
“The problem is it’s [Under Armour] trading at about 62 times earnings versus its competitor Nike, which tends to trade more around 25 percent,” Gibbs said. “Another thing about Under Armour is that it is unusually volatile around earnings reports.”
Under Armour is set to report earnings in late July and to Gibbs’ point, the stock tends to move around 8 percent the day of reporting, and more often than not to the downside.
Check out the video above to watch the full discussion on today’s CNBC “Street Signs.”