Despite the on-going pyramid scheme accusations against Herbalife Ltd. (NYSE:HLF) by billionaire investor Bill Ackman, the company is receiving positive convictions from Wall Street analysts and are raising their price target for the stock.
The stock price of Herbalife Ltd. (NYSE:HLF) surged by 10 percent yesterday after reports that hedge fund titan, George Soros initiated a huge, long position in the nutritional supplement company. The shares of Herbalife are slightly up at $65.52 per share after trading hours on Thursday, August 1.
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According to Charlie Garparino, senior correspondent of Fox Business News, the lawyers of Ackman are pressing the Securities and Exchange Commission (SEC) to investigate the possibility of market manipulation behind the investment of Soros in Herbalife Ltd. (NYSE:HLF).
Amid all the controversies surrounding the nutritional supplement company, Barclays research analysts said that the fundamentals of Herbalife Ltd. (NYSE:HLF) shows otherwise, given the fact that it continues to achieve strong bottom line and to line results.
Barclays analysts, Brian Wang and Meredith Adler noted that the nutritional supplement company made different efforts to improve the transparency of its business model with negligible impact on results, and easily understood by investors.
In addition, the analysts emphasized that Herbalife Ltd. (NYSE:HLF) maintains a very strong free cash flow and returns capital to shareholders through dividend and shares buyback. The company is planning to raise its debt to fund a substantial shares repurchase program in the near future.
Herbalife managed to alleviate the concerns of investors
Adler and Wang believe that Herbalife Ltd. (NYSE:HLF) managed to remove or alleviate the concerns of investors after hiring PricewaterCoopers as its new auditor with a timeline to complete the re-auditing of its previous financial results, which is not later than the end of the year. The analysts projected that the company will announce a huge shares repurchase program over the next several months.
The analyst maintained their overweight rating and raised their price target for the shares of Herbalife Ltd. (NYSE:HLF) to $73 due to the continued strength of the company’s business. The company reported $1.41 earnings per share in the second quarter, higher than $1.18 EPS consensus estimate. For the third quarter, Adler and Wang estimated that the company will be able to achieve $1.15 EPS, $5.00 EPS for the entire fiscal 2013, $5.50 for the full fiscal 2014.
On the other hand, Cannacord Genuity analysts, Scott Van Winide and Mark Sigal noted that Herbalife Ltd. (NYSE:HLF)’s business in China and North America is accelerating significantly. According to them, the deployment of its daily consumption models worldwide will drive double-digit revenue and earnings growth.
The analysts also noted that the guidance provided by the company is conservative with an unfavorable currency headwind. They recommended a buy rating and a price target of $77 a share for the shares of Herbalife Ltd. (NYSE:HLF). They also raised their fiscal 2013 estimate for Herbalife Ltd. (NYSE:HLF) to $4.95 per share and fiscal 2014 estimate to $5.50 per share.