Under Armour shares drop 6 pct. on downgrade
NEW YORK (AP) — Shares of clothing maker Under Armour Inc. dropped more than 6 percent in Thursday trading, as UBS analysts downgraded the company's rating on signs of a slowdown in sales after a strong early spring.
THE SPARK: UBS analysts Michael Binetti and Steven Strycula said they believe a robust run of Under Armour stock and the indications of a slowdown "leave less stock upside in the near term."
Under Armour's stock outperformed its peers but that has diminished recently, suggesting that spring sales came early with warm weather in March and April, the analysts wrote in a research note. They also said that Under Armour appeared to have been taking market share from Nike Inc., since the competitor had raised prices "too aggressively." Nike's recent reversal of some price increases left Under Armour less room to exploit the situation, the analysts said.
THE BIG PICTURE: Baltimore-based Under Armour makes jackets and clothes for workouts and sports. The recovering economy helped buoy apparel sales. Falling cotton prices also raised clothing makers' profits.
THE ANALYSIS: Binetti and Strycula downgraded Under Armour to "Neutral" from "Buy." They kept their 12-month price target for the stock at $105.
The analysts said the pace of the company's sales could pick up again, with new products to be launched in the second half of the year.
SHARE ACTION: Under Armour shares fell $6.71, or 6.4 percent, to close at $98.47 amid steep declines in the broader market. The stock has traded between $52.62 and $107.86 in the past 52 weeks.