Editor’s note: This article was first published in July 2013; Herbalife’s second-quarter 2013 results, share price, all-time high, year-to-date gain and Bill Ackman’s losses were current market news then. Herbalife later reached a settlement with the FTC in 2016, and Ackman closed his short in 2018.
Herbalife has just reported its results. Second-quarter earnings rose 8.5%, and the company expects good results through the end of the year. The stock closed today up 3.63%, and after the results were released Herbalife is up nearly 6% in after-hours trading.
Remember that Herbalife is locked in a war with Bill Ackman’s Pershing Square Capital Management, which bet $1 billion on its shares falling, claiming that the company is built on a pyramid scheme. Meanwhile, the famous investor Carl Icahn threw his support behind the company, investing a large amount of money in its shares and saying that Bill Ackman’s short would end up as the most embarrassing in Wall Street history.
The fact is that, at this point, Bill Ackman’s losses already run into the hundreds of millions of dollars, since the stock has gained 83% so far this year.
The stock is trading at $64.09, and its all-time high is at $72. In principle that is a zone of strong resistance; if the stock manages to break through it, there would be no resistance left in its way. Even so, on fundamentals, and despite the results it has just presented, we still think the stock is overvalued.
Featured image: Eduardo Francisco Vazquez Murillo, CC BY-SA 2.0, via Flickr.
