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Today’s Trading Edge: Under Armour shares fall on earnings miss and poor outlook

Posted by WorldWideMarkets . on Jan 31, 2017 7:59:14 PM

WWM UA JAN 31 2017.jpg

Under Armour Inc. (UA) shares tumbled over 25% to $21.40 following its fourth quarter results that highlighted the end of a 26-month streak of at least 20% sales growth and weak guidance.  The second largest US sportswear maker reported better than a slight miss with profit and a big miss in revenue and the 2017 guidance was slashed.  The company reported earnings of $0.23 a share, a miss from the analysts’ consensus of $0.25.  Revenue rose 12% to $1.31 billion, much lower than expectations of a $1.41 billion print. The company also cut its 2017 op income outlook to ~$320 million, much lower than the prior up mid-teens percentage.  The revenue forecast was cut to 11-12% from revenue growth in low 20% range. 

CEO Kevin Plank noted, “We are incredibly proud that in 2016, we once again posted record revenue and earnings, however, numerous challenges and disruptions in North American retail tempered our fourth quarter results.  The strength of our Brand, an unparalleled connection with our consumers and the continuation of investments in our fastest growing businesses footwear, international and direct-to-consumer -- give us great confidence in our ability to navigate the current retail environment, execute against our long-term growth strategy and create value to our shareholders.”

Price action on the UA daily chart shows that today’s slide broke below the $20 level and may have invalidated a bullish ABCD pattern.  Point D was targeted with the 161.8% Fibonacci expansion level of the B to C leg.  If bearish momentum continues price may not find support until the $15 region.  If we see the selloff end, further upside may find resistance from the $22.50 level. 

The Trade: Sell UA at $19.50, with a stop loss at $20.50 and a take profit at $16.50.  The Risk/Reward Ratio is 1:3

 

Topics: Stocks, US Stocks, US equities

 

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