On Monday, DA Davidson adjusted its outlook on Herbalife (NYSE:HLF) shares, a global nutrition company. The firm's analyst revised the stock price target downward to $9.50 from the previous $11.00, while maintaining a Neutral rating on the stock.
The reappointment of company veteran John DeSimone as CFO and the announcement of an additional $80 million in cost savings from headcount reductions were highlighted. These savings are anticipated to directly benefit the company's bottom line.
The analyst has increased the first quarter 2024 sales estimate for Herbalife to a 1.5% year-over-year growth, up from a previous forecast of a 1.7% decline. Despite this adjustment, the company's expected EBITDA for the quarter remains unchanged. For the full year 2024, the EBITDA estimate has been raised by $40 million, or 8%, to reflect the newly identified cost reductions.
Herbalife's recent moves, including the cost-cutting measures, have provided enough clarity for the company to issue guidance. This indicates a more transparent outlook for investors and analysts following the company's financial performance. The revised sales and EBITDA forecasts are a direct result of these developments.
Still, the company faces increased long-term risks to its core business, according to the analyst. This concern has led to a reduction in the target multiple from 5.5x to 4.5x. The concern stems from the endorsement of GLP-1 drugs by media mogul Oprah Winfrey, which could potentially impact Herbalife's market.
The new stock price target of $9.50 is based on a 4.5x multiple of the expected 2025 EBITDA, which has been increased from $565 million to $645 million. This adjustment reflects both the cost savings measures and the potential challenges that may affect the company's future growth and profitability.
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