Herbalife Ltd. (NYSE:HLF) stock seems to have mostly stabilized after the earnings shock earlier this week. In spite of the negative surprise, little seems to have changed in the analyst world. Bulls are still bulls, and bears are still bears.  In the case of Barclays analysts, they think a revitalization of growth is possible, simply because of the company’s focus on a healthy active lifestyle.

Herbalife

Why Herbalife disappointed

In a report dated July 30, 2014, analyst Meredith Adler and her team note that Herbalife has more difficult comparisons this year. They blame those comparisons for the main disappointment for the volume point slowdown in the second quarter in some markets, including the U.S. and China.

The analysts are encouraged by Herbalife’s efforts to enforce the rules about what its distributors should and shouldn’t be saying to potential new members. They say that for now, these efforts appear to be “dampening sales,” particularly in the U.S. However, they expect this to change after the company completes its planned 18-city tour in the U.S. later this year. They say distributors should receive more guidance about what they’re allowed to say and that “established” distributors seem to be “especially eager” to hear more about the new selling points.

Herbalife’s morphing business model

The Barclays team sees the most important element in the Herbalife Ltd. (NYSE:HLF) story is how its business model has been morphing. They note that many markets are seeing daily consumption be combined with fitness activities and contests. They say this makes Herbalife’s weight loss program “more powerful.” In particular, they see innovation in the U.K. market where volume point growth is greater than 20%, in spite of the fact that the company has been operating there for three decades.

The analysts also say the successful approaches followed by distributors are being shared from market to market. They add that Herbalife management thinks that even in markets where sales are declining, like South Korea, could be revived by changing the business model. They point to success in the daily nutrition industry as a whole, which revitalized markets that were growing more slowly when the concept was introduced five to ten years ago. As a result, the Barclays team remains “optimistic” that Herbalife’s “healthy active lifestyle” approach with distributors will increase its revenues.

Herbalife keeps buying back stock

They also note that Herbalife Ltd. (NYSE:HLF) has continued to generate free cash flow and intends to continue being “opportunistic” about its share repurchases, despite the fact that the company has already paid $581 million to buy back 9.8 million shares.

The Barclays analysts believe that the second quarter’s slowdown might “turn out to be a trough in the medium-term growth rate.” As a result, they reiterated their Overweight rating and $94 per share price target on Herbalife, citing the company’s strong fundamentals and “low valuation.” They note that the company’s shares fell 14%, and they believe most of that price drop was due to options activity.