Stifel Downgrades Nu Skin To Sell Amid Chinese Clampdown On Direct Selling

Multi-level marketing company Nu Skin Enterprises, Inc. NUS has been embroiled in a recent controversy surrounding a customer death who reportedly relied solely on the company's health products to treat fever.

The Analyst

Stifel analyst Mark Astrachan downgraded Nu Skin from Hold to Sell and reduced the price target from $63 to $43.

The Thesis

The bearish sentiment toward Nu Skin reflected the uncertainty surrounding direct selling companies in China against the backdrop of an investigation announced early January into the unlawful promotion and sale of health products, leading up to a 100-day ban on business meetings, Astrachan said in a note.

This, along with the recent death of the company's registered customer in China, has elicited strong reactions from two communist party publications, one of which called for an investigation into the death and the company's misleading advertising.

The development, according to the analyst, is reminiscent of the events of 2014 that ultimately led to the suspension of meetings and recruitment, culminating in a two-year sales decline for Nu Skin in China, which accounts for 33 percent of its sales.

"That said, we note the current situation is, at this time, directed more toward the broader health products/ direct selling market and not specifically at Nu Skin, which has not yet been specifically targeted," the analyst wrote in the note.

Price Action

Nu Skin's stock traded down 3.9 percent to $47.32 per share Monday afternoon.

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