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July 31, 2007

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.

Posted by Jay Hancock at 10:26 AM | | Comments (0)
        

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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