Bank Of America Moves GNC And Vitamin Shoppe On Rating Changes

Bank of America expanded its coverage of the healthcare industry with ratings on GNC GNC and Vitamin Shoppe VSI.

GNC: Buy from Neutral, $50 Price Objective from $47

Among catalysts for the upgrade is a record low amount of short interest. Aanalyst Curtis Nagle believes this may be the end of negative sentiment.

Nagle also wrote about the company’s new IT system, saying, “We believe that the adoption of Dunnhumby’s CRM and pricing platform will significantly increase the effectiveness of GNC’s loyalty program and pricing dynamics. In our opinion, the market does not appreciate the potential for Dunnhumby to sustainably drive comps for years to come.”

The $50 price target was derived with a 14 times forward earnings multiple. Shares of GNC are currently trading at just 12 times sales.

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Vitamin Shoppe: Upgrade to Neutral, $47 Price Target from $39

Nagle still believes Vitamin Shoppe’s multiples do not warrant a purchase of the stock. “We believe a Buy rating is not warranted because of lower store productivity and shares already trading at a healthy premium to the hardlines group and GNC. Cash is building, but we now view buybacks as unlikely given commentary that VSI is evaluating manufacturing opportunities.”

The $47 price target on Vitamin Shoppe implies a 17 times forward EPS multiple; the previous price target used a 15 times multiple.