Lululemon Has Tanked, Is Under Armour Next?

Lululemon Athletica shareholders endured a torrid 2013 with multiple price plunges as well as very worrying manufacturing and supply chain issues. The latest development, when its management issued a weak fourth-quarter forecast and lowered the full-year guidance, provided the final straw. The stock plunged a massive 17% in the space of just a week.

The stock's market correction was probably long overdue, since Lululemon traded at enormous valuations in both 2012 and much of 2013. That brings us to the big question: will Under Armour follow in Lululemon's footsteps, since both are viewed as growth stocks in the sports apparel industry? Although Lululemon traded at a considerably higher valuation than peers Nike and Columbia Sportswear , Under Armour has been trading at even higher valuations for the last twelve months which truly reflect the heightened expectations of growth for the company.


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