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On Friday, DA Davidson upgraded shares of Herbalife (NYSE:HLF) from Neutral to Buy, setting a new price target of $14.00, a significant increase from the previous target of $7.50. The upgrade was influenced by the company’s recent convention and CEO meeting, which bolstered the firm’s confidence in Herbalife’s ability to sustain positive constant currency sales growth. According to InvestingPro data, the stock is currently trading at $7.99, with a notably low P/E ratio of 3.15, suggesting potential upside opportunity.
Herbalife’s fourth quarter of 2024 saw a 3% increase in constant currency sales, marking a consistent performance with positive growth in four of the last five quarters. Stephan Gratziani, who is set to assume the role of CEO on May 1, 2025, has been credited with achieving double-digit new distributor growth for three consecutive quarters. The company’s financial health is rated as GOOD by InvestingPro, with particularly strong scores in profitability and relative value metrics.
The mid-point of Herbalife’s 2025 guidance indicates an expectation of a 4% increase in constant currency sales growth. Additionally, the company’s free cash flow was approximately $375 million over the two-year period of 2023-2024. Herbalife’s leverage has decreased to 3.2 times, with a target to further reduce it to 3.0 times by 2025.
DA Davidson’s decision to upgrade the stock rating and price target is also based on an increased target multiple, which has been raised to 5 times from the previous 4 times. This adjustment reflects the firm’s enhanced confidence in Herbalife’s financial performance and growth prospects going forward.
In other recent news, Herbalife Nutrition Ltd. has announced plans to acquire Pro2col Health LLC, Pruvit Ventures, Inc., and a majority stake in Link BioSciences Inc. These acquisitions, expected to close in the second quarter of 2025, aim to enhance Herbalife’s personalized nutrition offerings. Meanwhile, S&P Global Ratings has upgraded Herbalife’s issuer credit rating from ’B’ to ’B+’ due to successful deleveraging efforts, including the repayment of $65 million in debt in the first quarter of 2025. This upgrade reflects improved volume declines and distributor trends, along with a reduction in leverage to 4.1x in 2024.
In another development, Moody’s Ratings has revised Herbalife’s outlook to stable from negative, affirming its B1 Corporate Family Rating. This change is attributed to improved leverage, increased free cash flow, and positive trends in distributor recruitment. Additionally, Citi has maintained a Buy rating for Herbalife with a $13 price target, despite noting a decline in digital engagement across various markets, particularly in the United States and Mexico.
Mizuho (NYSE:MFG) Securities has adjusted its price target for Herbalife to $8, maintaining a Neutral rating. This adjustment follows a notable increase in distributor growth, although the firm remains cautious about the sustainability of revenue growth. These developments highlight Herbalife’s strategic moves and financial adjustments as it navigates challenges in the competitive nutrition and wellness industry.
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