On Thursday, DA Davidson maintained a Neutral stance on shares of Herbalife (NYSE:HLF) shares but increased the price target to $13.00, up from the previous $9.50. The adjustment follows Herbalife's second quarter 2024 earnings report, which revealed a slight increase in constant currency sales of 0.2%, falling short of the anticipated 2.7% due to weaker performance in Asia.
Despite this, the company's EBITDA for the quarter reached $180 million, a 6% year-over-year increase, surpassing consensus expectations by $31 million.
Herbalife has updated its EBITDA guidance for the year 2024, raising it by $10 million. This cautious revision accounts for the anticipated impact of unfavorable foreign exchange rates and reduced volume forecasts for certain countries in the second half of the year.
However, the company did experience a notable uptick in new distributor growth, which saw a 12% year-over-year increase, marking the first growth in this area after 12 consecutive quarters.
The financial firm's decision to raise the stock price target is based on an increased target multiple, which has been adjusted to 5.0 times from the previous 4.5 times. This change is underpinned by a positive outlook for Herbalife's future constant currency sales growth, influenced by the recent growth in new distributor numbers.
The price target is now calculated using a multiple of 5.0 times the estimated EBITDA for the year 2025, which has been slightly revised upwards to $658 million from $655 million.
Herbalife's second quarter performance and the revised guidance indicate a mixed financial landscape for the company. While sales did not meet expectations, the substantial beat on EBITDA and the increase in new distributor growth provide a basis for the adjusted price target and the maintained Neutral rating. The new stock price target reflects a more optimistic valuation of the company's earnings potential moving forward.
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