A couple days after Under Armour announced that they've purchased a 60 second spot in the Super Bowl their market cap dropped almost $600 million. CNBC is connecting this drop directly to the Super Bowl ad investment. Here's how CNBC covered the story today:
"Because largely on news of this ad, the stock has plummeted from $42.08 at open yesterday to a $29.80 open today"
"A Super Bowl ad must really have a negative connotation because there's not much more news on Under Armour to report that would cost this stock to go down so much."
A closer look at reports from analysts firms reveal a more complicated story. Wachovia lowered their rating on the stock after the company indicated that "1H08 earnings were expected to be in the range of $0.03-$0.05 as a result of heavy marketing expenses related to the cross-trainer footwear advertising campaign. While we had anticipated that earnings might be significantly back-end weighted, the magnitude of the shift is much more severe than we imagined."
The charts reveal that the stock price has been on a downward trend over the last several months.
Credit Suisse recognizes the short-term earnings issue and offers a positive outlook:
"Marketing is a critical investment for any brand company, and in this case, the timing of it is largely a technicality and is clearly driving the shift in earnings. We have always maintained that revenue growth and gross margin are the true measures of a brand's health and profitability, and with the exception of some gross margin pressure in 2Q due to the large initial shipments of lower margin footwear, we expect both metrics to be strong throughout all quarters in 2008."
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