UPDATE: Bank of America Merrill Lynch Downgrades Nu Skin Enterprises
In a report published Friday, BofA Merrill Lynch analyst Olivia Tong downgraded Nu Skin Enterprises (NYSE: NUS) from Buy to Neutral, with a $94.00 price objective.
According to the report, earlier this week, an article in China's People's Daily suggested that NUS was engaging in improper selling practices amongst other things. The following day, China's State Administration for Industry and Commerce (SAIC) said that it would look into the People's Daily's claims. NUS announced intraday yesterday that it is launching its own review of its China branch.
“While the likely duration of the investigation into NUS is unclear, our China Strategy team noted in a July 2013 report ‘What all these investigations of foreign firms are about' that of the investigations into foreign companies it analyzed, 53% were completed within six months, but 36% are either still ongoing or have unknown end dates, suggesting to us that if resolution to Nu Skin's government inquiry is positive (i.e., no action), it may not be immediately apparent to the market,” the report noted.
The report further asserted that their scenario analysis suggest that even assuming only a 10 percent probability that NUS is ultimately out of China our implied current fair value is $85.00, with a 12 month upside to $94.00 based on 14x P/E.
NUS closed Thursday at $84.80 with shares trading down at 26.41 percent.
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