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On Tuesday, DA Davidson maintained a Buy rating on Herbalife shares (NYSE:HLF) with a set price target of $14.00. The firm’s analyst highlighted Herbalife’s potential for a business turnaround following recent strategic initiatives by the new CEO. These initiatives are aimed at reinvigorating distributor engagement, improving digital capabilities, and acquiring new technologies to set Herbalife apart in the wellness industry. According to InvestingPro data, the stock appears undervalued, trading at just 3.2 times earnings with a robust free cash flow yield of 20%.
The analyst noted that the number of new distributors, which is considered a key indicator of future sales, has seen double-digit growth for the past three quarters. Furthermore, Herbalife has provided guidance for a 4% increase in organic sales by 2025 at the mid-point. These positive developments come at a time when Herbalife’s balance sheet is deleveraged, and the company is generating positive free cash flow. InvestingPro analysis shows the company maintains a "GOOD" Financial Health score, with particularly strong marks in profitability and relative value metrics.
Despite these encouraging signs, Herbalife’s stock is currently trading at what DA Davidson considers a deep discount. The firm’s valuation is based on a projected 2026 EBITDA of $658 million, with the stock trading at approximately four times this estimate. This valuation aligns with the analyst’s criteria for a management change, indicating a favorable outlook for the company under its new leadership.
The addition of Herbalife to DA Davidson’s STAMPEDE list underscores the firm’s confidence in the company’s strategic direction and future performance. The STAMPEDE list comprises stocks that are expected to benefit from specific catalysts, in this case, Herbalife’s management changes and the associated business improvements. With these factors in mind, DA Davidson reaffirms its positive stance on Herbalife’s stock prospects.
In other recent news, Herbalife reported a 3% increase in constant currency sales for the fourth quarter of 2024, with expectations for a 4% rise in 2025. The company has also announced plans to acquire Pro2col Health LLC, Pruvit Ventures, Inc., and a majority stake in Link BioSciences Inc., aiming to enhance its personalized nutrition offerings. DA Davidson has upgraded Herbalife’s stock from Neutral to Buy, raising the price target to $14, reflecting confidence in the company’s sales growth and future prospects. Citi has maintained its Buy rating with a $13 target, noting mixed digital engagement trends across different markets.
S&P Global Ratings upgraded Herbalife’s credit rating from ’B’ to ’B+’, citing successful deleveraging efforts and improved distributor trends. The company repaid $65 million of debt in the first quarter of 2025, reducing its outstanding balance and avoiding potential credit facility issues. Moody’s has revised Herbalife’s outlook to stable, acknowledging improved leverage, positive distributor recruitment trends, and enhanced free cash flow. These developments are part of Herbalife’s strategic efforts to modernize its business model and strengthen its financial position.
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