Nu Skin Enterprises, Inc. (NUS)’s China Problems Nearly Resolved

Nu Skin Enterprises, Inc. (NUS)’s China Problems Nearly Resolved

Nu Skin Enterprises, Inc. (NYSE:NUS) revealed on Monday that it will soon be able to resume normal operations in China. Needless to say, this was good news to Wall Street, which is no longer pricing in an extended suspension of sales in that key market. Canaccord Genuity analysts have raised their price target for Nu Skin, although they maintained their Hold rating, as have analysts at Stifel.

Nu Skin price target raised

In a report dated March 24, 2014, analysts Scott Van Winkle and Mark Sigal of Canaccord Genuity increased their price target for Nu Skin Enterprises, Inc. (NYSE:NUS) from $78 to $93 a share. They note that the regulatory overhang in China is over.

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They see the small $540,000 fine as a good resolution to the problem, particularly because it doesn’t seem like Nu Skin Enterprises, Inc. (NYSE:NUS) will face any more regulatory problems in China. They say this resolution improves Nu Skin’s visibility in its biggest market and “growth engine.” In addition, Nu Skin won’t have to make any major changes to its business model, which means that the only question now is when business activities will resume.

Determining the impact on Nu Skin

The Canaccord Genuity team expects regular distributor activity to resume in the second half of this year. However, they say the exact timing of it will be key in projecting when sales will bottom out in China and then forecasting the size and trajectory of sales there. Currently, they’re assuming that Nu Skin Enterprises, Inc. (NYSE:NUS) will resume normal activities in the second quarter and return to local currency growth in China in the third quarter.

Stifel analysts Mark Astrachan and Edward McPike note that Nu Skin Enterprises, Inc. (NYSE:NUS) management did not update its first quarter guidance or issue expectations for the second quarter or full year. In their report dated March 24, 2014, they said they believe this means that management is still trying to assess what kind of impact the investigation will have on the company.

The Stifel team believes there’s pent-up demand from representatives who have wanted to sign up to be distributors of Nu Skin Enterprises, Inc. (NYSE:NUS)’s products and were not able to sign up. The company had voluntarily stopped accepting applications for some time. The analysts also say some representatives may have left Nu Skin and signed up for a competitor because of the investigation and / or negative press.

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