Market Overview

Will Nu Skin Escape the Herbalife Stigma?

Proponents call it multi-level marketing. Bill Ackman calls it a pyramid scheme –- at least when it comes to Herbalife (NYSE: HLF).

Nu Skin (NYSE: NUS) calls it a good day on the market.

Nu Skin, which makes and sells anti-aging and nutritional products, had a good day indeed, closing Thursday up 7.6 percent.

It wasn't just a good day for Nu Skin. The company said fourth quarter revenue is expected to hit $588 million, representing 19 percent growth over the prior year.

"Our business continues to perform very well," said Truman Hunt, president and chief executive officer, " adding that the expected fourth quarter revenue growth will surpass prior revenue guidance by $58 million.

That's the good news. Then there's the whole “Bill Ackman says Herbalife is a pyramid scheme” thing. Is there guilt by multi-level marketing?

On August 16, Citron Research, in an 18 page report, alleged that Nu Skin violates Chinese laws due to its pyramid-like compensation scale.

Nu Skin, according to CNBC, completely denied the allegation and claims that China has completely endorsed its business methods within the country.

The jury may still be out on this. Over the past month, Nu Skin is up 0.1 percent while Herbalife has seen gains of 2 percent but Herbalife has attracted the hedge funds giants on the long side where Nu Skin hasn't seen the amount of media attention it could have in light of the ongoing Herbalife battle.

If the ongoing SEC probe of Herbalife produces material information that catches the eye of other government agencies, guilt by association could be a real possibility for Nu Skin.

But with Nu Skin revenue up and pyramid scheme accusations against it no longer a hot item, analysts are calling the stock a “Buy.” Nu Skin currently has 8 “Buy” or “Strong Buy” ratings with no “Sell” or “Hold” ratings.

One such bullish analyst is Mark Astrachan of Stifel Nicolaus, who said that Nu Skin's strong quarterly performance results from strong sales are likely driven by new distributor growth in developing markets. Astrachan sees the stock as likely to rise on the outlook, especially considering how much it beat Wall Street's estimates. Astrachan reiterated a "Buy" rating and a $53 price target.

In early trading today, Nu Skin stock is down slightly. Rival, Herbalife, which fell $1.54 or 3.4 percent Thursday, is unchanged.

Posted-In: Bill AckmanHedge Funds Reiteration Intraday Update Analyst Ratings Movers Trading Ideas General Best of Benzinga

 

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