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With the incredible volatility of the market (the Dow opened up down about 275 and closed up about 280 in the same day!), I decided not to sit with this sizeable position long-term. I sold 650 of my 800 shares, leaving 150 for a possibly longer-term holding, at $35.54/share. This was a gain of $.55/share or 1.6% since purchase minutes earlier. With a more-or-less successful trade, I shall keep the Under All shares in my Trading Account and treat them as a new position that has had one sale at a gain already. In other words, instead of waiting for a loss of 8% if the stock should decline, I shall be unloading my shares should the stock hit my purchase price or lower. In addition, I shall allow myself the opportunity of making another "trade" should the opportunity arise.
As background, Under Armor (UA) announced 3rd quarter 2007 results on October 30, 2007. Net revenues for the quarter incrfeased 46.3%, income climbed 53.8% and diluted earnings per share climbed 25% to $.40 from $.32/share last year. The company in the same announcement raised guidance on net revenues for 2007 to the $590 to $600 million range from the prior range of $580 to $590 million, and raised guidance for annual income to $81.5 to $83 million from prior guidance of $79 to $81.5 million.
The third quarter report easily beat expectations of analysts of $.34/share on revenue of $171 million.
More recently, the stock of Under Armor has been under pressure as it provided 1st half guidance well under expectations. The company announced expectations for first half of 2008 for $.03 to $.05/share. Analysts had been expecting $.26/share in the first quarter and $.13/share in the second quarter according to analysts polled by Thomson Financial. This guidance well below expectations had a deadly effect on the stock price and the stock price reflected this disappointment. Also driving the stock down strongly last week was the downgrade by Wachovia Capital Markets analyst John Rouleau.
Ironically, while the company was lowering guidance for the first half they were also raising guidance for the full year 2007 to $605 million, ahead of the above noted guidance as well as ahead of the 'street. They also reported expectations for $1.03 to $1.04/share in 2007 ahead of the $1.01 expected by Reuters.
Longer-term, the Morningstar.com "5-Yr Restated" financials page is strong if imperfect, with steady revenue growth, limited earnings results, free cash flow which more recently is negative at $(4)million, and a solid balance sheet.
Chartwise, the 'point & figure' chart on UA from Stockcharts.com looks quite week, with the stock breaking below support of $61 back in September, 2007, and heading lower since then.
With the mixed Morningstar report, the recent guidance below expectations, and the chart that looks less than strong, the best I can do is
UNDER ARMOR (UA) IS RATED A HOLD
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