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On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook for Herbalife (NYSE:HLF), increasing the price target to $8.00 from the previous $7.00, while keeping a Neutral rating on the stock. Currently trading at $8.64, the company sports a notably low P/E ratio of 3.4x, according to InvestingPro data. The revision followed a period of notable distributor growth for the company, which was seen as a positive sign by the securities firm.
Herbalife reported a modest decrease in Q4 volume points, showing a 0.7% year-over-year decline, which was the smallest drop since the second quarter of 2021. The stock has shown strong momentum, with a remarkable 29.15% return year-to-date. Additionally, the company experienced a 22% acceleration in the growth of new worldwide distributors, marking the third consecutive quarterly increase. This uptrend has led Mizuho to believe that Herbalife’s full-year 2025 foreign exchange-neutral revenue guidance, which anticipates a growth range of 1-7%, is highly likely to be met.
The company’s adjusted EBITDA also surpassed expectations, contributing to the favorable assessment. Despite this, Mizuho has revised its adjusted EBITDA forecasts for FY25 and FY26 to $626 million (down from $634 million) and $648 million (down from $669 million), respectively, due to stronger than anticipated foreign exchange headwinds.
Mizuho’s analysts have indicated that more time is needed to determine the sustainability of revenue growth and new distributor productivity. Nevertheless, factors such as moderating sales declines, a low valuation, and short interest at a three-year high suggest a potential floor for the stock’s valuation. The updated price target of $8 is based on approximately 7.5 times the projected CY25 EBITDA.
While Mizuho remains cautious about Herbalife’s immediate prospects, the firm has expressed a preference for other companies in the health and wellness sector. Specifically, Mizuho favors BellRing Brands (NYSE:BRBR) (OP: PT $85) and Simply Good Foods (OP; PT $45), citing their operational performance. InvestingPro analysis suggests Herbalife is currently undervalued, with multiple ProTips and detailed financial metrics available to subscribers. Access the comprehensive Pro Research Report for deep-dive analysis of Herbalife’s financial health, valuation, and growth prospects.
In other recent news, Herbalife Nutrition Ltd reported robust financial results for the fourth quarter of 2024, significantly exceeding earnings projections. The company’s earnings per share (EPS) reached $0.36, far surpassing the anticipated $0.11, while revenue hit $1.2 billion, exceeding forecasts by $10 million. This strong performance was attributed to strategic product launches and expanded distribution channels, particularly in the U.S. retail market. Meanwhile, High Liner Foods also reported its fourth-quarter results, noting a 1.3% increase in sales volume and an 8.7% rise in adjusted EBITDA compared to the previous year. The company’s performance was bolstered by increased distribution and strategic investments in promotions and innovations.
Both companies have been navigating challenging market conditions, with Herbalife maintaining a strong competitive position despite potential increases in raw material costs and tariff impacts. High Liner Foods, on the other hand, has been managing macroeconomic headwinds, including a slowdown in the foodservice industry, by focusing on value-driven promotions and innovations. Herbalife is exploring merger and acquisition opportunities, while High Liner Foods is actively seeking M&A opportunities to support long-term growth. Analysts have shown interest in these developments, with firms like Cormark Securities and BMO Capital Markets engaging with High Liner Foods on their strategic plans and market outlook.
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