Analyst Downgrades Under Armour Stock After Its CEO Praises Donald Trumpby
Move makes it hard to build ‘cool urban lifestyle,’ he says
Susquehanna also cites valuation, slowing growth for downgrade
Under Armour Inc.’s chief executive officer made a mistake praising President Donald Trump, and the move could take a toll on the athletic brand’s reputation and stock price, according to a Susquehanna International Group analyst.
CEO Kevin Plank’s recent comment that Trump was a “real asset” to the country drew rebukes from Under Armour’s own celebrity endorsers, including NBA star Steph Curry. The controversy, along with broader concerns about Under Armour’s valuation and slowing growth, led Susquehanna’s Sam Poser to downgrade the stock to negative from neutral.
Plank’s pro-Trump commentary makes it “nearly impossible to effectively build a cool urban lifestyle brand in the foreseeable future,” Poser said in a report. He also cut his stock-price target to $14 from $24, putting him at the low end of Wall Street peers.
“At this point we don’t believe Under Armour is in danger of losing Steph Curry,” Poser said. “However, it simply cannot be good for business if the face of Under Armour spoke out so pointedly against the CEO’s comments. Other Under Armour brand athletes such as Dwayne ‘The Rock’ Johnson and Misty Copeland have also spoken out against Mr. Plank’s comments.”
Shares of Baltimore-based Under Armour fell as much as 2.6 percent in early trading, but they rebounded after the bell. As of 10:24 a.m. in New York, the stock was up 0.6 percent to $19.53. It had lost 23 percent of its value this year through Tuesday’s close.
In responding to Plank’s remark about Trump, Curry said he agreed with the description “if you remove the ‘et’” from asset.
Poser compared the incident to a gaffe by Lululemon Athletica Inc. in 2013.
In responding to concerns about yoga-pant pilling, founder Chip Wilson said the problem was the bodies of some customers. “Some women’s bodies just actually don’t work,” he said on Bloomberg Television. “It’s about the rubbing through the thighs.”
That incident led to a “strike” by some Lululemon customers, Poser said. And the stock price went from $68 to $46 in a few months.
In Under Armour’s case, the company later took steps to distance itself from Trump by opposing his executive order on immigration.
“We are against a travel ban and believe that immigration is a source of strength, diversity and innovation for global companies based in America like Under Armour,” the athletic brand said in a statement last week.
Plank, 44, also took out an ad in the Baltimore Sun on Wednesday saying that his earlier comments “did not accurately reflect my intent.” He said the company supports equal rights and that immigration is a “source of strength” for companies like Under Armour. The ad didn’t mention Trump by name.