Why This Herbalife Nutrition Analyst Cannot Digest The Business Model

Herbalife Nutrition Ltd HLF was gearing up to report its quarterly earnings on Feb. 14.

The company’s greatest challenge was its multi-level marketer (MLM) business model, according to BofA Securities.

The Herbalife Nutrition Analyst: Anna Lizzu initiated coverage of Herbalife Nutrition with an Underperform rating and a price target of $14.

The Herbalife Nutrition Thesis: There was much more limited visibility into the sales channel of direct sellers than of their retail-based peers, Lizzu said in the initiation note.

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Herbalife Nutrition had outsized exposure to emerging markets, with North America generating only around 25% of sales in 2021, the analyst stated. “HLF has relied on the growth of certain markets to bolster sales, particularly in Mexico, Brazil, Spain, and China, to offset slower growth in more mature markets,” she added.

“Meanwhile, the growth of emerging markets is more volatile than mature markets, resulting in lower visibility into sales growth.,” Lizzu further wrote.

HLF Price Action: Shares of Herbalife Nutrition had declined by 10.73% to $16.28 at the time of publication Friday.

Photo: rafapress via Shutterstock