Under Armour’s (UAA) stock plunged 25% after the company reported lower-than-expected top and bottom lines and glum guidance. The company’s CFO (chief financial officer), Chip Molloy, also announced his sudden decision to step down citing “personal reasons.”
Under Armour is now trading 123% below its 52-week high price. The company has already lost more than 26% YTD (year-to-date). It was among the worst-performing S&P 500 stocks in 2016 and had lost 30% during the year.
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Competitors Nike (NKE) and Lululemon Athletica (LULU) have gained 4.3% and 2.2%, respectively, YTD. In fact, Under Armour is the worst-performing apparel and accessory company YTD. Even in-the-red apparel giants like VF Corporation (VFC) and PVH Corporation (PVH) have done better than UAA.
Under Armour is now trading at 47x its next 12 months earnings. This compares to an average PE (price-to-earnings) ratio of 63x in 2014, 77x in 2015, and 61x in 2016.
While its valuations have come down drastically, UAA continues to trade at a premium to most apparel peers. By comparison, Nike, LULU, and Columbia Sportswear (COLM) were trading at one-year forward PE ratios of 21.9x, 27.6x, and 19.4x, respectively, as of February 1, 2017.
ETF investors seeking to add exposure to UA can consider the SPDR Consumer Discretionary Select Sector ETF (XLY), which invests 0.30% of its portfolio in the company.
After its 4Q16 results, UAA went through a series of downgrades and target price revisions. Wall Street now has set an average target price of $23.5 on Under Armour, indicating an upside of about 10% over the next year. Nike and Columbia Sportswear each have upsides of 17% attached to their current stock price.
Continue to the next part of this series for a look at Wall Street’s revised outlook on the Under Armour.