UAA - The F-Word: Why Under Armour Stock Likely Headed Lower
Fraud.
It's the five-letter word that no investor wants to see when reading about a company he or she has invested in. The consequences for the company, the stock, and sometimes even the industry can be catastrophic. It's one thing for a company to miss earnings or fall short of expectations, but it's quite another for its numbers to be potentially misleading. That's the problem investors of Under Armour (NYSE: UA) (NYSE: UAA) may face today.
Last week, the company released its third-quarter results, and even though it beat earnings and sales expectations for the period, the stock still plunged more than 18% by the end of the day the report was released. And while lower guidance could be partly to blame for the sell-off, a drop in fiscal 2019's expected growth rate to 2% from a previous forecast of 3% to 4% is hardly going to be responsible for such a significant drop. Rather, investors were spooked by news that Under Armour's accounting practices were being reviewed by not only the Securities and Exchange Commission but also the Justice Department.