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Herbalife: Still standing after powerful assaults

April 25, 2017

Initiating coverage on Herbalife Ltd. HLF, Tigress Financial Partners said nobody has ever worked so hard to discredit the company, yet no company has ever stood up as well as Herbalife.

Ivan Feinseth, director of research, noted that following Pershing Square branding it as a pyramid scheme, given that 90 percent of its customers are distributors and not end users, the company has reached an agreement with the FTC, paying $200 million as a settlement amount.

“HLF agreed to several changes to its business practices as well as additional oversight and compliance,” the firm said.

Consistent Execution

Tigress noted the company has consistently demonstrated a long history of profitability and committed distributor and customer base. The firm expects the business performance to accelerate now that distractions and controversies are in the past.

Specifically, the firm expects the company’s revenue growth to meet or even exceed its five-year growth rate of 8 percent, with annual revenue exceeding $6 billion by 2021.

Other Catalysts

Among the other catalysts outlined by Tigress are:

  • Strong balance sheet and strong cash flow.
  • Recent joint venture with Chinese manufacturer and distributor of herbal extracts and pharma products.
  • Global expansion, with deeper penetration into the Chinese market.
  • Significant short interest.

Growth Focus Augurs Well

The firm initiated coverage on the company with a Buy rating, believing significant upside exists in the shares from current levels. The positive opinion is premised on the FTC issues now behind, allowing the company to focus on growth, driven by new product launches, new marketing initiatives and global expansion.

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