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On Thursday, DA Davidson reaffirmed its Neutral rating on Herbalife (NYSE:HLF) shares, maintaining a price target of $7.50. The decision followed Herbalife’s fourth-quarter earnings report, which surpassed expectations in terms of sales and EBITDA. With current EBITDA at $507.3 million and trading at an attractive P/E ratio of 8.4x, InvestingPro analysis suggests the stock is currently undervalued. Herbalife’s constant currency sales rose by 2.7%, exceeding DA Davidson’s projection of 2.0%. This positive financial news propelled the stock to climb over 20% in after-hours trading.
Despite the overall positive results, Herbalife experienced mixed performance across its regional markets. Two key regions, EMEA and China, did not meet the constant currency sales estimates set by DA Davidson. The company’s total revenue reached $4.99 billion in the last twelve months, though showing a slight decline of 1.37%. Nonetheless, the company saw a notable uptick in new distributor growth, which increased by 22% year-over-year for the third consecutive quarter.
Looking ahead, Herbalife provided guidance for 2025, anticipating constant currency sales to grow between 1% and 7% year-over-year. However, EBITDA projections for the same period are expected to range from a decrease of 5% to an increase of 1%, affected by foreign exchange fluctuations. In light of these forecasts, DA Davidson has slightly reduced its EBITDA estimates for 2025 but has chosen to retain its 2026 projections and price target. The firm’s price target is based on a 4.0x multiple of its 2026 EBITDA estimate of $658 million.
The analyst from DA Davidson expressed a cautious optimism, indicating a desire to observe further quarters of solidly positive constant currency sales growth before adopting a more bullish stance on Herbalife shares. This measured approach reflects the firm’s interest in sustained performance as a basis for any potential rating changes in the future.
In other recent news, Herbalife Ltd. reported fourth-quarter results that exceeded expectations, leading to a 13% surge in its stock. The company posted adjusted earnings per share of $0.36, surpassing analyst estimates of $0.11. Revenue for the quarter was $1.2 billion, slightly above the consensus forecast of $1.19 billion. Despite a 0.6% year-over-year decline in net sales, sales increased by 2.7% when adjusted for currency fluctuations. Herbalife’s adjusted EBITDA margin improved by 340 basis points year-over-year to 12.4% in the fourth quarter. Additionally, the company announced Stephan Gratziani as the new CEO, effective May 1, with current CEO Michael Johnson transitioning to Executive Chairman. Looking ahead, Herbalife projects net sales growth of 0% to 4% for the first quarter of 2025 and 1% to 7% for the full year on a constant currency basis. These developments indicate a positive outlook for the company, according to analysts.
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