Under Armour soars $8 on profit results
Under Armour, the Baltimore sports-apparel company, hit all-time highs this morning after disclosing second-quarter earnings and estimating results for the near future. The stock shot up 15 percent in early trading, hitting $63.
A lot of this is short covering. Under Armour has grown so far so fast that many expected it to stumble and bet that the stock would fall. Specifically, they borrowed shares and then immediately sold them, hoping to pay them back later when the stock was cheaper. Unfortunately for them, Under Armour disclosed killer results this morning. To close out their positions, the short-sellers are having to buy back the stock to repay their borrowed shares. Naturally this sends the price even higher.
There must be some satisfaction at UA headquarters in Tide Point that the short sellers are on the run. But it won't be all smooth sailing. At 75 times trailing earnings and 65 times projected earnings, this stock is still very very expensive. "Priced for perfection," as the saying goes. The short sellers may yet make some money.