Under Armour (UA) held back by the Shorts

Under Armour, Inc. (NYSE:UA) is taking a chance on it's new cross-training shoes the Prototype. Next year, Under Armour plans to attack the much larger (11 times bigger) running-shoe market. So with its stock down almost 50% since last October, what can they lose?

Today UA shares jumped up 4%, but then again, what isn't moving today with the DOW finally moving 100+ points.  Under Armour has not recovered since late 2007, to think shares were trading in the $70's, today it's trying to break above $35.

So what's keeping it down besides missing the earnings call which isn't anything new these days?

The Short Float.

The company recently reiterated annual sales growth, however the Street feels they will not be able to meet their expectations as sales growth continues to slow.The company made $20 million in 2007's third quarter and $3 million in 2008's first quarter. And an alarming rise in inventory levels last year helped drive down the share price. Feels like Crocs Inc (CROX) all over again.

Even if UA makes the sales, you can't expect the American consumer to go out and throw down close to $100 for cross trainers when you don't even have MJ or some other sports legend on the shoe, not during a 'Recession'.

Just take a look at the new Under Armour Men's shoes, forget the women's and kids shoes, the guys is who they are after, would you pay this much or would you go with Nike or Adidas?

Last month, Under Armour, Inc. reiterated its fiscal 2008 net revenues and continues to expect annual net revenues in the range of $765-$775 million, revised its income from operations outlook to $103.5 to $104.5 million, compared to the previously estimated income from operations (EBIT) of $108.5-$110.5 million. According to Reuters Estimates, analysts were expecting the Company to report EBIT of $108.54 million on revenue of $775 million for the same period. 

Look, I want Under Armour to succeed, and I want to buy an undervalued stock, but with consumer spending slowing and the high short interest in UA, how can you buy the stock right now?  Tack on UA inventory concerns, revenue growth, and everything else under the sun -- it's a tough sell to take a risk on UA right now. 

Masters, UA could become the next Nike, but it's going to take time and Wall Street has to get behind them.  For the moment, Under Armour has a ton to prove to investors to get their share price to rally.  UA is a great company, has an incredible story but that doesn't add up to a safe investment for the time being.

Disclaimer: No positions in UA.