Avon Vs. Nu Skin: Jefferies Initiates Coverage
This is the opportune time to get into Avon as the company continues with its three-year transformation. It could be a slight "leap of faith" as the company's "S-T financial outlook looks opaque," Young stated. Despite reduced visibility, Young is confident the management's list of priorities for 2016 is very achievable.
The company has set forth a $350 million supply chain/overhead cost savings plan and a 10 percent EBITDA margin by 2018. The analyst sees a 200 percent upside and his "base case suggest the stock could more than double by the end of '17." Finally with the sale of NA in March, more girth has been added to the top line and this should alleviate cash concerns with a transformation in progress.
The analyst is unimpressed by Nu Skin's business model. Nu Skin has a "narrow product offering and revenue growth hinging largely on 1-2 new products each year and has already faced some set backs" Young noted.
The company's revenue lacks diversity with 79 percent coming from APAC and 34 percent from Greater China. The company expects the Chinese market to drive growth until 2019, but with high volatility and "regulatory intervention" by the government this seems like a stretch in Young's eyes. With "margins under pressure and guidance [that has] proven volatile" Young has decided to remain cautious with NUS.
Latest Ratings for AVP
|Aug 2016||Deutsche Bank||Maintains||Buy|
|Jun 2016||Jefferies||Initiates Coverage on||Buy|
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