Herbalife Ltd. (NYSE:HLF) has received a series of recent downgrades, most recently coming from Zacks, which moved the rating to Neutral from Outperform.
While Zacks maintains a price target of $64.20 after the downgrade, over 20% above the current share price near $54, Canaccord Genuity cut their price target from $87 to $73, moving their recommendation form a Buy to a Hold rating.
There has been much talk in recent years about disruption and trying to pick companies that will disrupt their industries. The debate continued at the Morningstar Investment Conference as Bill Nygren of Oakmark Funds faced off with Morgan Stanley's Dennis Lynch. Q2 2021 hedge fund letters, conferences and more Persistence Morningstar's Katie Reichart moderated the Read More
Barclays raises price target, then Federal Trade Commission announces investigation
The current downgrades come as Barclays PLC (NYSE:BCS) (LON:BARC) had raised their price target on the stock in January to $94 from $78. Two days after Barclays raised their price target, shares fell as much as 12% in early trading today after U.S. Sen. Ed. Markey (D-Mass.) urged regulators to investigate the company as a possible pyramid scheme.
Herbalife at center of hedge fund war
The investigation into Herbalife Ltd. (NYSE:HLF) is the center of a war of activist hedge fund titans Carl Icahn, who is long the shares and has publicly argued with fellow activist fund manager Bill Ackman, who is short. As previously reported in ValueWalk, Ackman, head of hedge fund Pershing Square Capital which has a $1 billion bet against Herbalife Ltd., has engaged in a rather public battle to talk the price of the stock down. He has compared Herbalife to a pyramid scheme because distributors recruit distributors who recruit distributors, creating an ever-lasting commission trail.
Ackman organized lobbying campaign to influence regulators
In early March the New York Times revealed a June meeting that took place between Ackman and fellow hedge fund managers, in which Ackman talked about what he saw as the inevitable collapse of Herbalife, but this time he had a new wrinkle. At a steakhouse in Midtown Manhattan, Ackman revealed a lobbying plan to influence government regulators to take action to bring about the downfall of Herbalife Ltd. (NYSE:HLF). His team of lobbyists paid civil rights organizations $130,000 to help him collect names of people who were “victimized” by Herbalife Ltd. (NYSE:HLF) so he could then use these letters to lobby Congressman and regulators.
Ackman has recently attacked Herbalife’s China operations. Icahn’s response was to file a lawsuit against Ackman — as the stock price and company management continue to operate amidst the hedge fund battle.
Last month Herbalife Ltd. (NYSE:HLF) released its earnings report, delivering $1.29 per share for the quarter, beating analysts’ estimates, which had estimated an average of $1.17 per share. The estimate for the current fiscal year is $6.04 earnings per share.
Herbalife Ltd. (NYSE:HLF) is a network marketing company that sells nutritional supplements, energy, weight management, fitness products and personal care products through a sales network where distributors recruit other distributors, which is the subject of charges that the company is a “pyramid scheme.”