JP Morgan Cuts Nu Skin Estimates Through 2016, Sees Large China And MERS Risk

In a report published Thursday, JP Morgan analyst John Faucher maintained a Neutral rating on

, while lowering the price target from $60 to $40. The EPS estimates for 2015 and 2016 have also been reduced on expectations of turmoil in China and MERS outbreak in South Korea and other Asian markets. Although the consensus expectations have not been revised, the stock has underperformed its peers. The analyst believes that such trends could limit recovery for the stock in the second half of the year. Given that Nu Skin has significant exposure to South Korea, the outbreak of the Middle East Respiratory Syndrome (MERS) is likely to impact its business. The analyst also expressed concern regarding FX headwinds, stating, "Based on our estimates, the hit from fx for 2015 and 2016 should be approximately 1 pt worse than we were modeling previously. From its major currencies, the one that is hurting NUS the most incrementally is the South Korean won." The analyst also expressed concern regarding Nu Skin's recovery in the China market. "Although visibility for NUS's business in general and China specifically is extremely low, we are worried about a weaker macro backdrop given the stock market volatility and potential follow through on the economy," the JP Morgan report added. The analyst expects Nu Skin to see a 6 percent year-on-year decline in its sales in Mainland China during Q2. The EPS estimates for Q2, 2015 and 2016 have been lowered 4 percent.