Herbalife Analyst Coverage Continues to be Horrendously, Ridiculously, Embarrassingly Bad

With every day that goes by, bullish Herbalife analysts look more and more ridiculous.

Today, we’re going to look at two graphics which go a long way to show you how impotent and worthless the sell side is on Herbalife. Aside from Matt Stewart’s skewering of Meredith Adler’s analysis this morning (which should have you falling out of your chair laughing and was good enough to make it into a letter published by PSQ today), I’ve also prepared a nice snapshot of how the sell side has weighed in on Herbalife over the last year and a half. It looks like this:

ssssssssssssssssssssssssssssss

So far, nearly every single analyst recommendation up to this point has been wrong. Zack’s, which I’m still not convinced isn’t a monkey sitting at typewriter smoking cigarettes somewhere, actually impressed me today by being the first semi-legit firm/analyst to publish a realistic price target on Herbalife. They listed the company as a “strong sell” and “under-perform” with a price target of $33.10. Bravo to them.

Remember this? I do.

beef2

Let’s take a trip back to April of 2014. Barclay’s had just issued a PT on Herbalife at $94, and I penned the aptly titled “Barclays Beefs It’s Herbalife Analysis.” Herbalife was trading at around $56 at the time. This is what my piece looked like:

beef3

Meredith Adler, in preparing this report, had enlisted the help of MLM attorney Kevin Thompson, who has been so prophetic with this case he actually said “Ackman’s gamble is over” in 2013. It’s starting to look increasingly like Mr. Thompson (who has now turned a bit more critical, to his credit) didn’t quite have the foresight to see how this one would play out.

beef1

Yup. He “called it” alright. “Wasting investors money” and “faulty assumptions” were the terms he used. Mr. Thompson was, at the time, part of a group of people including several hedge fund managers that all took shots at Bill Ackman when they had the chance. Mr. Chapman and Mr. Hempton went on national television in an attempt to discredit Mr. Ackman. Outside of national media in the whispers of hedge fund circles, everyone was taking a jab at Mr. Ackman when they could. I know because I was catching wind of it, and I’m basically a nobody when it comes to the big names on Wall Street. If it was trickling down to me, I can only imagine what those in the hedge fund inner circles were hearing.

What these people don’t realize is that this trade isn’t about Bill Ackman – it’s about Herbalife.

Back to the Barclay’s report – Thompson and Bob Chapman – two peas in a pod. Of course, I concluded that Adler’s entire analyst report was, for lack of a better saying, insanely wrong. Here’s how I concluded:

Surely, Mr. Thompson wasn’t expecting the FTC to peek their head in and investigate. And surely, this Herbalife debate is anything but over. And look, it’s 5 months since Mr. Thompson penned that piece.

This is like Mr. Icahn admitting that self-consumption “problems” have been dealt with live on CNBC a couple of weeks ago. “Problems had been cleaned up” – remember? What problems? I thought this industry was squeaky clean and rock solid? Remember the Amway litigation?

It turns out that even Herbalife supporters like Mr. Thompson are missing some of the bigger points in this argument. I don’t contend that this is a “fine and penalty” situation – I contend this is a situation where people may have been knowingly bilked out of money, and that there’s going to be some liability to go around after the FTC concludes its investigation. To what extent, who knows – more than a fine, though, I’m guessing.

Further, Mr. Thompson’s conclusion that any action taken here in the U.S. will only effect the U.S. is bogus. Any action undertaken here is likely to turn a lot of head in major countries (although they may slip through the cracks of high caliber governments like Cambodia) – if the U.S. acts, it is setting a precedent for other countries to act. And, if the U.S. comes out and says that Herbalife is operating a pyramid scheme, other countries are definitely going to take notice.

Today is a great day for a reminder of Mr. Icahn’s FTC lawyer, who informed him that the FTC would not be investigating the company at all – I wonder if that ol’ chap is still on Mr. Icahn’s payroll?
And when all is said and done, will Mr. Thompson still be “on the payroll” at Barclays?

After Herbalife’s disastrous earnings report days ago, even guys like Tim Ramey (somewhat) came to their senses. Ramey put a $75 PT on the company (still about $75 too much, but marked down from $110). Adler, perhaps under some kind of heavy sedation, lowered her price target from $90 to $80. Her upside estimate calls for 100% return from current levels and her “downside” estimate of $40 has already been cut through like a hot knife through butter today.

So, between her and Ramey we seem to have an intense competition of who can be completely wrong the quickest. I imagine Tim Ramey to be like Gil Gunderson from the Simpsons – perpetually down on his luck and forever missing the boat.

Gilofficial
Old Gil just knows Herbalife is going to $100 one of these days…

So, let’s get this straight. Ramey slaps a $110 PT on the stock and it goes from $83 to $50. He leaves his job at DA Davidson, where he likely cost investors money. He goes to work for one of Herbalife’s largest shareholders in Bill Stiritz at POST. Stiritz, who has arguably taken on a massive conflict of interest in investing in Herbalife, then takes mark to market losses in the hundreds of millions. Stiritz is no longer CEO of POST for whatever reasons, but Ramey still works for POST as a consultant. Then, Ramey takes a leave of absence from being a public analyst, only to return months later with Pivotal. From here, he makes the King Solomon like decision that he’s sticking to his guns on Herbalife and promptly issues another $110 price target. It’s a matter of mere hours before he is proven to be wrong, by an ungodly factor, when Herbalife comes out and delivers an earnings report that makes the Chernobyl meltdown look like a toddler spilling a sippy cup of milk. Then, Ramey has a small mea culpa in changing his price target, but Adler – no such luck.

Instead, from a senior analyst at Barclays, we get this gem, that suggests Adler doesn’t even know that the company is under investigation.

upanddown

Umm, hello in there? Is this really the work of a Barclay’s analyst? Did someone else have to sign off on this incredibly embarrassing report? Does the main analyst for Barclay’s actually not know that this company is being investigated by no less than 5 regulatory agencies? Forget about “trying to convince regulators to open an investigation,” when was the last time Adler had a performance review at Barclay’s?

Who is god’s name is signing this woman’s paychecks? Worse, who is God’s name is listening to this woman for investment advice? I mean, I know the sell side makes their scratch from getting people to trade, but this is absurdly embarrassing.

While the sell side and other analysts continue to make fools out of themselves, I continue to contend that Herbalife is a worldwide confidence game and pyramid scheme that is now showing signs of saturation. I’m sticking to my original price target.
(It’s $0, by the way.)
DISCLOSURE: I’m short. Duh.

9 thoughts on “Herbalife Analyst Coverage Continues to be Horrendously, Ridiculously, Embarrassingly Bad

  1. My god, has she come forth with any explanation on this? Either. She is so far out of the loop with HLF, or she simply rehashed a report of hers from 2 years ago. Either way, it’s such an egregious mistake, Barclays needs to fire her to save what little credibility they have left after this.

    Liked by 1 person

  2. Perhaps Meredith Adler was listening to someone like Lionel Hutz who famously told Marge Simpson, “There’s the truth…and the truth.” (second “truth” said with air quotes).

    You know, there’s the truth that there are multiple ongoing investigations into the decidedly shoddy and very possibly criminal business practices of herbalife, and then there’s the “truth” that Bill Ackman is “trying” to get an investigation off the ground, with its implication that it’s a dubious prospect at best.

    Or, perhaps Meredith Adler is the latest version of the White Queen, dedicating herself to believing six impossible things before breakfast. Whatever she’s up to, Barclay’s has made an incredibly stupid move in hiring and retaining her.

    (thanks for bringing Old Gil back, I miss him.)

    Liked by 1 person

  3. The letter from Pershing Square to Ms. Jones Harbour is truly a thing of beauty. I’d like to read all nineteen pages of it aloud to those who still defend herbalife.

    The problem would be that I could read it to them but who would understand it for them? Clearly someone needs to sit Meredith Adler down, speak very slowly and get out the hand puppets. Perhaps then she could see how abysmal her analysis really is.

    Liked by 1 person

  4. If not put out of its misery, Herbalife will not saturate. I know, because I was in Amway for 16 years and most prospects had never heard of Amway or MLM, and there are about 5 million people turning 18 in the U.S. alone. The internet has helped a bit for English speaking people, and two of the major reasons why HLF and other MLMs are going mostly towards minorities is because of their lack of internet access and English reading capability. We need regulatory and law enforcement sledge hammers to be used to their full extent.

    Liked by 1 person

    1. In fact, the recent changes to HLF’s rules, namely the banning of tool scams, will slow down recruitment, cause the amount of time people stay in longer (because they aren’t being ripped off as quickly), and may make saturation even less likely than it is now.

      Like

      1. I can’t take any of your comments seriously since I visited your website where you spoke of your deep love and admiration of the repugnant Rush Limbaugh.

        I’ve since seen you’ve been banned from many anti-mlm websites for personal abuse of other posters.

        Like

  5. Speaking of Pamela Jones Harbour, did you know she had this to say about Google?

    “One of her primary areas of disagreement with her former FTC members was a Google case. Ms. Jones Harbour stated “To Google, users of its products are not consumers, they are the product. The data Google collects on you leads directly to the higher rates it charges its real customers – advertisers.”

    Ah, the irony! “…users of its products are not consumers, they are the product.” Where have we heard that before?” (Fan of the Droid on SeekingAlpha)

    Like

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