Even after plunge, Under Armour shares are overvalued, analyst says

Instinet lowered its rating on Under Armour to reduce from neutral, citing the risks of the company's high valuation given its slowing sales growth. "UAA appears to have matured past its high-growth phase, while still enjoying its high-growth multiple," analyst Simeon Siegel wrote in a note to clients Monday. "However, even in an overly optimistic scenario … UAA 'the shares' are fairly valued at best and anything short of perfection could weigh on shares as slowing growth rates normalize the lofty multiple." Under Armour shares are down more than 25 percent year to date through Friday, with most of the decline occurring after the company gave weaker-than-expected 2017 sales guidance in its fourth-quarter earnings report on Jan. 31. Siegel lowered his Under Armour price target to $16 from $27, representing 27 percent downside from Friday's close. The analyst cited how the company trades at 52 times consensus forward earnings on sales growth of 13.5 percent for the next 12 months. Under Armour's sales grew 22 percent in 2016. In comparison, a basket of growth consumer stocks on average trade at 23 times forward earnings with 11 percent sales growth for the next 12 months, according to Instinet's research. Siegel said even if the company beats its full-year earnings guidance by 50 percent its shares are "still expensive." He stated how Under Armour missed its own guidance in each of the past three quarters and its profit margin fell significantly in the fourth quarter. "Slowing sales, along with a challenging promo environment & the internal mix shift impacts could challenge the FY [fiscal year] 'down slightly' GM [gross profit margin] guide," he wrote. Siegel also cited how the Jan. 31 resignation of Under Armour Chief Financial Officer Chip Molloy is the fourth C-level executive departure since October 2015, which is "hard to ignore." And in regard to NBA superstar Stephen Curry's recent negative response to Under Armour CEO Kevin Plank's comments on President Donald Trump , the analyst said: "We have no place opining on PR & endorsement deals, so we won't. But it's probably not a good thing when stars speak out against mgmt." — CNBC's Michael Bloom contributed to this story.

Kevin Plank, CEO of Under Armour.

Adam Jeffery | CNBC

Instinet lowered its rating on Under Armour to reduce from neutral, citing the risks of the company's high valuation given its slowing sales growth.

"UAA appears to have matured past its high-growth phase, while still enjoying its high-growth multiple," analyst Simeon Siegel wrote in a note to clients Monday. "However, even in an overly optimistic scenario … UAA 'the shares' are fairly valued at best and anything short of perfection could weigh on shares as slowing growth rates normalize the lofty multiple."

Under Armour shares are down more than 25 percent year to date through Friday, with most of the decline occurring after the company gave weaker-than-expected 2017 sales guidance in its fourth-quarter earnings report on Jan. 31.