"Herbalife (HLF -0.8%) has long taken a cautious and measured approach to growing its mainland China segment that allows it to better manage its operations and salespeople," says analyst Scott Van Winkle, reiterating his Buy rating and $87 price target following the Nu Skin (NUS -8.1%) blow-up. "Its China compensation model differs from NUS and is consistent with the model utilized by other direct sellers in the market."
China accounts for about half of Herbalife sales and maybe half of that much as a percent of profit, adds Van WInkle, so the shares are overly discounting any perceived risk at this point.
The selloff may also prompt the company to accelerate its buyback program sooner rather than later, suggests Van Winkle, noting about $1B of cash on the books at the end of the year. "We continue to expect strong Q4 results will also serve as a positive catalyst when reported next month and recommend buying HLF on yesterday’s share price weakness."
USANA (USNA +0.4%)