Why Wall Street Has a ‘Buy’ Rating on Herbalife Stock



Impressive financial performance

Herbalife (HLF) impressed investors with its financial performance in the first nine months of 2018. The company’s sales have grown at a brisk pace in the past couple of quarters with the US returning to growth and generating stellar sales and volumes. Meanwhile, growth rebounded in China strongly, and sales continue to grow in Mexico. The Asia-Pacific region, particularly India, is generating strong sales and is likely to support its top line in the coming quarters.

The company’s gross margin is expected to benefit from higher pricing and self-manufacturing coupled with strategic sourcing. Strong sales and higher margins are expected to support the company’s earnings.

However, adverse currency rates could play spoilsport. The company’s management expects its top line to take a significant hit from unfavorable currency rates. Meanwhile, EPS could remain weak in the fourth quarter, reflecting the negative impact from currency fluctuations.

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Rating and target price

About 60.0% of the analysts covering Herbalife stock suggest a “buy,” and 40.0% of the analysts recommend a “hold.” Wall Street has a consensus target price of $63 on Herbalife stock, which indicates an upside potential of 15.2% based on its closing price of $54.69 on October 30.

Besides Herbalife, Wall Street also maintains a “buy” on Nu Skin Enterprises (NUS) and Usana Health Sciences (USNA). Meanwhile, analysts maintain a “hold” rating on Vitamin Shoppe (VSI) stock.


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