Herbalife Ltd. (NYSE:HLF) shares continued their downward trend in pre-market trading this morning as Barclays lowered its price target for the stock. They are maintaining their Overweight rating on the stock, although they have lowered their price target 33 percent from $89 per share to $60 per share. Today, analysts at BAML came out with a report on the company, which was more positive.
In a report to investors this morning, Barclays analysts said while Herbalife management “did a good job of debunking” some of the claims made by well-known hedge fund manager Bill Ackman, many investors still weren’t satisfied.
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The analysts said there is “a lot of grey area” surrounding the multi-level marketing business model, especially in terms of who buys the products sold by the company. They said Herbalife Ltd. (NYSE:HLF) tried to address those concerns using surveys from third parties, but they don’t believe that defense convinced short sellers that the company is not, as Ackman has said, a pyramid scheme.
Ackman has said he will rebut the company’s defense and raise more topics of concern regarding the company. Barclays analysts said they expect Ackman and Herbalife Ltd. (NYSE:HLF) to continue making press with their arguments against each other “for the foreseeable future.” They also note that a number of high-profile investors have taken either long or short views on shares of the company’s stock, which will likely mean that the stock will be very volatile. Therefore they say the company’s stock is “not for the faint of heart.”
Herbalife Ltd. (NYSE:HLF) is scheduled to release its preliminary fourth quarter results next week, and Barclays believes those results will be strong. That update is also expected to eliminate the company’s blackout and make it possible for the company to buy back its stock. They said Herbalife could buy back almost 20 percent of its shares, “which would be materially accretive to earnings.”
The analysts said this morning’s estimates do not include the advantage of Herbalife Ltd. (NYSE:HLF) becoming authorized to repurchase its stock, which would result in a more than 15 percent upside to this morning’s report.