Initial Thoughts on UnderArmour: Why it’s On The Radar
August 16, 2012 Leave a comment
Jim Cramer, the hug-able, love-able, and smart CNBC Mad Money says: ”UnderArmour is a technology company.”
Whether true or not, the stock has certainly behaved like a high growth tech company…and has been valued like one too. LST is not sure if it is a tech company or not, but may initiate a starter short position in the near future for the following reasons:
- Recent divergence in paper earnings vs. cash flow trends.
- Insider selling.
- Dick’s Sporting Goods UK JJB Sports writeoff makes it tougher for UA to grow there.
- A few minor accounting red flags that may signal bigger problems.
- Executive resignations over the last 2 quarters.
- Consumer companies hyped as tech companies offer ”fad” play.
OPEN QUESTIONS
- Is UA a “technology company” ? To what extent yes, and no?
- What are its core products and why are they so appealing? Do competitors currently offer compelling alternatives?
- Is there buyout potential at these levels? Why buy when you can build (build vs buy) for a fraction of the cost? Why pay ~$6 billion, when you can build spending, say $600 million over a 5-10 year horizon?
