Canaccord Genuity analysts also trimmed their earnings estimates for Herbalife
Herbalife continues to face headwinds from currency exchange rates due to the strengthening of the U.S. dollar. As a result, more than one firm has trimmed their price targets for the nutritional supplements company. Earlier this month, it was Barclays. Now Canaccord Genuity has followed suit.
In their report dated Jan. 21, analysts Scott Van Winkle and Mark Sigal said they’re maintaining their Buy rating but cutting their price target from $60 to $50 per share. They updated their model because of “unfavorable movements” in currency exchange rates.
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They added that Herbalife’s valuation has continued to compress as uncertainties about the Federal Trade Commission’s ongoing investigation keep hanging over the stock. However, they think the current share price “overly discounts” Herbalife itself and also its cash flow.
For the December quarter, they made just a small revision for currency because they think most of it was hedged at rates from early in October. They removed 150 basis points from their U.S. growth projection because they think November could have “moderated” as the first part of the changes to the company’s marketing plan began to go into effect.
The Canaccord Genuity team estimates earnings of $1.27 per share for the December quarter and $1.186 billion in sales for the quarter. For the 2015 fiscal year, they’re estimating $4.77 billion in revenue and $5 per share in earnings, compared to their previous estimates of $5.01 billion and $5.50 per share in earnings for the full fiscal year. Herbalife is scheduled to release its next earnings report on or around Feb. 18.
They see Herbalife taking the biggest hit in Mexico due to foreign exchange rates, as they model a 9% negative impact. In Europe, the Middle East and Africa, they’re projecting an 8% negative impact, and in Central and South America, they expect a negative impact of 7%. In the Asia / Pacific region, they expect to see a negative impact of 4%.
This month Post Holdings Executive Chairman Bill Stiritz continued to raise his stake in Herbalife as the company’s share price declined. Obviously he agrees with Canaccord Genuity in seeing the company’s stock as undervalued.
UBS was another firm which recently took advantage of the decline in Herbalife’s stock price.
As of this writing, shares of Herbalife were up 1.6% to $31.03 per share.