HLF Stock Forecast: Herbalife Remains A Solid Bet On Multi-Level Marketing

motek 1The HLF Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • It is true that global quarantines from COVID-19 pandemic will continue to be a headwind for a direct marketing firm like Herbalife.
  • However, in the long run, Herbalife remains an attractive bet if you like the multi-level marketing industry. It is risky but it could be profitable to go long on HLF while there’s a pandemic.
  • HLF’s price will eventually recover after countries start lifting travel restrictions and revoking stay-at-home quarantines.
  • Moreover, many enterprising independent distributors are active online sellers of Herbalife products.
  • Food supplements like those made by Herbalife are considered essential goods. They can still be delivered to buyers during quarantines.

I reiterate the buy rating I gave to Herbalife (HLF) last January 2016. Yes, I am aware that as a direct marketing company, Herbalife has an ongoing debilitating headwind from COVID 19. The travel restrictions imposed by many governments around the world are a handicap to the multi-level marketing (MLM) approach of Herbalife. Many independent MLM distributors cannot go house to house to recruit new downline members and sell Herbalife products. This is the reason HLF has a YTD return of -27.40%.

The ongoing travel restrictions in COVID-19 affected countries is why HLF is still trading at below $40. I made my January 2016 buy recommendation when this stock was trading below $24. I am highly confident that this article will replicate that old 2016 article’s profitable endorsement. Herbalife’s brand has a global-wide cult following.

(Source: Seeking Alpha)

Don’t Worry, Herbalife Is Still In Business

I have above average IQ so I understand that quarantines are not killing the revenue stream of Herbalife. Whether in America or in the Philippines, the online sales of Herbalife still persists. Americans and other citizens of this planet are still able to buy their Herbalife products from Amazon.

(Source: Amazon)

Herbalife products are considered food supplements. Food supplements are considered essential goods and they are not covered by travel restrictions. I can buy Herbalife products from Lazada Philippines why we are in total lockdown. My Lazada purchases are still being delivered because Herbalife-branded products are considered essential goods.

(Source: Lazada)

I accept that Q1 and Q2 revenue will be notably lower than Q4 2019’s $1.22 billion. However, I insist that online sales of Herbalife products will remain healthy during these pandemic months. There’s a big demand for immune-boosting supplements. COVID-19 virus infection is only fatal or serious to victims that have weak or compromised immune systems. I have a compromised immune system because I’m a diabetic with heart problems (hypokinesia of the left ventricle & cardiomegaly).

In addition to virgin coconut oil, I rely on immune system-boosting supplements from Herbalife and Amway to keep me safe from bacterial and viral infections. Yes, Herbalife products are pricey – but they do keep me away from hospitals and doctors. Doctors and hospitals are very costly here in the Philippines.

In other words, the fear over the COVID-19 virus (SARS-CoV-2) is likely boosting the sales of Herbalife’s immune health-boosting products like the ones pictured below.

(Source: Herbalife)

Herbalife Still Touts A Debt-Handicapped But Healthy Balance Sheet

The pandemic headwind is also not fatal to Herbalife because of this company’s healthy balance sheet.  You can bet on HLF and never worry that this company will go bankrupt from a 3-month or even 5-month quarantine mandates. Yes, I know Herbalife has a lot of debt ($1.8 billion long-term debt) but this company can service it. Herbalife will not default on its loan payments even if there’s a prolonged pandemic.

Herbalife’s Q4 2019’s cash & equivalents position is more than $800 million. It’s levered free cash flow is more than $132 million.

(Source: Seeking Alpha)

Conclusion

There is an inherent risk in betting on COVID-19 handicapped companies like Herbalife. If you can think asymmetrically, the pandemic beaten-down status of HLF is actually a good opportunity to own a share in one of the world’s best performing (third-largest too) multi-level marketing companies. After all this pandemic hurdle, it is reasonable to expect HLF will again trade above $40.

The chart below is not updated but it is still a compelling reason bet on HLF. Aside from NuSkin, only Herbalife is growing its annual revenue by more than 10%.

HLF Stock Forecast
(Source: epixelmlmsoftware)

The other reason why I’m still optimistic about HLF is I Know First’s bullish one-year forecast for it. The quantitative analysis AI of I Know First still expects HLF to trade higher than its current price of $34.61. It obviously shared my conviction that the pandemic is not a long-term handicap for Herbalife.

HLF Stock Forecast

Past I Know First Success with HLF Stock Forecast

I Know First has been bullish on the HLF stock forecast in past predictions. The I Know First algorithm issued a bullish outlook on January 16, 2016. The algorithm successfully forecasted the movement of Herbalife’s shares and rose by 7.22% after one year. See the chart below.

HLF Stock Forecast
(Source: Yahoo Finance)

This bullish HLF stock forecast was sent to the current I Know First subscribers on January 16, 2016.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock predictions, as well as a gold forecast, exchange rate forecast, and, in particular, Apple stock forecast. Today, we are producing daily forecasts for over 10,500 assets. These machine learning stock market forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the best investment opportunities in the market.

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Please note-for trading decisions use the most recent forecast