Companies and Brands

Why Things Might Not Get Better at Nu Skin

Nu Skin Enterprises Inc. (NYSE: NUS) saw its shares get battered and bruised on Wednesday. On top of weak sales guidance, it turns out that analysts are bailing out on Nu Skin in droves. What are investors supposed to do with the stock hitting 52-week lows despite a broad market recovery from last week’s lows?

The company lowered third-quarter revenue guidance to $570 million to $573 million. This would be flat with sales a year ago on a constant-currency basis, but it was well under the consensus estimate of $622 million from Thomson Reuters.

Nu Skin said that foreign currencies weakened by a strong U.S. dollar had hit revenues negatively by more than $60 million. The company claimed that it has seen improving revenue trends each quarter throughout 2015, but the Greater China region really hurt. Nu Skin claims that revenue growth in the third quarter was particularly strong in South Asia/Pacific, with ageLOC Youth driving over 20% growth in that region.

So, what are analysts saying? 24/7 Wall St. has seen the following research calls.

Canaccord Genuity analyst Scott Van Winkle maintained his Hold rating but lowered his price target to $45.00 from $48.00. He said:

A negative pre-announcement ahead of this week’s global convention implies softer trends in China, and the long awaited, sustainable turn in momentum in this key market has yet to materialize. While a new product cycle in the second half of 2015 is expected to help support the return of constant currency growth in the fourth quarter, underlying China trend appear soft.

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Bank of America Merrill Lynch maintained its Underperform rating and lowered its price objective to $40 from $44. Its rationale and rating said:

Nu Skin is a multi-level direct seller, which brings inherent risks, including lower visibility relative to peers at retail, however, over time, the model is well suited for faster-growing emerging markets. Only 8% of Nu Skin sales take place in the U.S., while Asia accounts for almost 80%. China is the company’s largest market at 32% of sales. … We suspect that with muted interest in the new launch in China, distributor trends are also unlikely to have seen a lift. … Despite very easy comps, execution is still clearly a key risk, and macroeconomic weakness seems to be further exacerbating existing woes.

Stifel downgraded the stock to Sell from Hold with a $35.00 price target. Details of that call have not yet been seen.

Nu Skin was indicated down 16% at $39.15 earlier in the morning, but after an hour of trading the stock had already done 4 million shares (for a four-times volume-spike) and the stock was down 23% at $35.78.

Nu Skin’s prior 52-week range was $38.00 to $62.87, but that new 52-week low as of Wednesday morning is $35.12.

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