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Consumer discretionary

How FTC Chair’s Departure Would Benefit Herbalife Ltd. (HLF): Pivotal Analyst

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Comments follow recent gains in the stock that were tied in part to news that FTC Chair and critic Edith Ramirez will step down next month

Pivotal Research remained convinced with a Buy rating and $90 price target on Herbalife Ltd. (NYSE:HLF) soon after the news of FTC chairperson and critic Edith Ramirez’s departure came. Following the news, HLF shares gained heavily on Friday trading session to close at $52. Pivotal Research’s price target implies to a 73.07% upside potential over the latest closing price.

Herbalife shareholders see the departure of Ms. Ramirez’s from the FTC panel as positive. Ms. Ramirez had strong opposition against businesses that adopt multi-level marketing. “With the departure of Chair Ramirez, the FTC will have three empty seats which means the Trump administration and its appointees will clearly influence the future course of the FTC for many years,” said Timothy Ramey of Pivotal Research.  

The analyst believes Trump administration would be less activist and more business-friendly than it was during Obama’s presidency. He says so on the basis of strong relations between Mr. Trump and Carl Icahn, largest shareholder of HLF.

Moreover, with the strengthening US dollar since the election, Mr. Ramey feels compelled to reduce EPS estimates by 35 cents in 2017. However he believes organic growth is more than anticipated on constant currency and powerful unit growth. According to him, HLF business has a solid tone, while powerful drivers like share repurchase lie ahead.

Pivotal Research’s baseline assumption suggests 5% to 7% organic growth over the upcoming three years. However, Mr. Ramey noted that Herbalife’s balance sheet continues to remain strong.  

The Cayman Islands based nutrition provider has a total market capitalization of $5.15 billion. The HLF stock has 18.71 price to earnings ratio and a 52 week high-low range of $72.22 – $42.26.

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