Herbalife stock price has imploded in the past few years, erasing billions of dollars in value. HLF plunged from a high of $61.65 in February 2019 to $6.25 today, its lowest level since 2009. This article explains whether Herbalife is a good stock to buy the dip in and what to expect.
Why Herbalife stock has crashed
Herbalife is an American company in the multi-level marketing industry. It uses its large team of sellers to source new business in the US and other countries. These salespeople sell products like supplements, herbal tea, soups, and snacks.
Herbalife became a popular company a few years ago when billionaires Bill Ackman and Carl Icahn took different stakes. Ackman placed a giant short trade on the company and accused it of running a pyramid scheme.
Icahn, on the other hand, invested in the company, hoping that it would push the stock much higher over time. This happened because Ackman had won a lawsuit against Icahn a few years earlier.
In the aftermath, Ackman closed his position, losing over $1 billion. Icahn then sold his stock, triggering a strong sell-off. Had Ackman not sold his stake, his funds would now be worth billions.
Herbalife’s business has slowed in the past few years, which explains why the stock has imploded. Its annual revenue moved from $5.8 billion in 2021 to $4.933 billion last year.
The most recent results showed that Herbalife’s net sales dropped by 0.6% to $1.2 billion. This slowdown is expected to continue this year as demand for its products weakens because of the weight loss drugs by companies like Eli Lilly and Novo Nordisk.
HLF to continue its turnaround
Herbalife is now implementing a turnaround strategy as it seeks to boost its sales. As part of this strategy, the firm announced that Stephan Gratziani as the chief executive.
The company has also continued to lower its debt. It slashed its debt by $250 million last year and is committed to reduce its debt by between $1 billion and $1.4 billion by the end of 2028.
Analysts expect this turnaround strategy will grow its sales in the next few years. The average estimate among analysts is that its first quarter revenue will be $1.22 billion, down by 3% from a year earlier.
Herbalife’s revenue will then drop by 1.15% to $1.27 billion in the second quarter. The annual revenue will be $4.94 billion this year, followed by $5.14 billion next year.
Its annual profit per share is expected to be $1.98 this year, followed by $2.51 next year. Herbalife often beats analyst estimates, which explains why they are bullish on the stock. The average HLF stock price forecast for the company is $9.33, up from the current $6.24.
Herbalife stock price technical analysis
HLF stock price chart | Source: TradingView
The weekly chart shows that the HLF stock price has been in a strong bearish trend in the past few years. This decline was in line with our prediction. It has crashed from a high of $58.95 in 2021 to the current $6.25.
Most recently, the stock has formed a descending triangle pattern. This pattern comprises of a horizontal line and a descending trendline that connects the highest swing since last year.
A descending triangle is a popular bearish sign in the market. It has remained below the 50-week moving average.
Therefore, the stock will likely continue falling as sellers target the key psychological point at $5. This price is about 20% below the current level. A move above the descending trendline will invalidate the bearish view.
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