What's up snitches, I bet Herbalife ($HLF) is not the name you were expecting to see today when you opened up WSB.
**MISSION BRIEF**
For those of you that don't know Herbalife, it's a MLM pyramid scheme company that makes their affiliates sell Wendy's dumpster tier quality protein shakes to neighborhood moms. To makes things worse, the company is down \~90% from their ATH of \~$60 in 2021 to a mere \~$5.78 today based on quarter after quarter of growth decline. Luckily I can still post this DD on WSB as its just over the $500MM market cap requirement.
https://preview.redd.it/p2nojs4vg4je1.png?width=925&format=png&auto=webp&s=d68cb393c7c63aac3915056c36f0beeb2922e998
And we're going to go LONG. Yes, LONG just like my pe...riodic losses in the market.
If you need some motivation for this trade or want to explore this HLF multiverse, go watch the 'Betting on Zero' documentary where you can see Bill Ackman and Carl Icahn battle it out over this stock. For the regarded ones among us, we will be roleplaying Carl Icahn for this one.
https://preview.redd.it/3wa3q7boi4je1.png?width=1163&format=png&auto=webp&s=16dd4ed18b97ef9812117c6ee749699eae98a496
Now I hear you asking, why are we going long? This company looks like it's speed running bankruptcy and setting a WR while doing it. The answer is simple, ~~I have no idea what I am doing~~, big money and insiders are betting on it's survival and a rebound in the stock price.
**EARNINGS**
Earnings is coming up for HLF on Feb 19 2025. That is Wednesday after market close folks.
Now lets look at the last few quarters of earnings:
* **Quarter Ending: Sep 30, 2024**
* Expected EPS: $0.30
* Actual EPS: $0.57
* 1-Week Post-Earnings Stock Price Change: +24.2%
* **Quarter Ending: Jun 30, 2024**
* Expected EPS: $0.39
* Actual EPS: $0.54
* 1-Week Post-Earnings Stock Price Change: -25.7%
* **Quarter Ending: Mar 31, 2024**
* Expected EPS: $0.37
* Actual EPS: $0.49
* 1-Week Post-Earnings Stock Price Change: +15.9%
* **Quarter Ending: Dec 31, 2023**
* Expected EPS: $0.39
* Actual EPS: $0.28
* 1-Week Post-Earnings Stock Price Change: -28.6%
Do you see the pattern? DO YOU SEE IT? Every earnings this mother father moves a lot. It moves 25% in a week like its nothing, filthy.
# Q2 2024 (April - June) – “One last dump”
* **Net Sales:** $1.3B (down 2.5% YOY)
* **Adjusted Net Income:** $54.8M
* **Gross Margin:** 77.9%
* **Office Sale:** Torrance HQ sold for $41M and leased back for 16 months
* **Debt Refinancing:** $1.6B completed earlier in the year
* **Restructuring Program:** $80M in annual savings expected in 2025
# Q3 2024 (July - September) – “Debt Paid, Bags Made”
* **Net Sales:** $1.2B (down 3.2% YOY)
* **Adjusted Net Income:** $58M
* **Adjusted EBITDA:** $166.5M
* **Debt Reduction:** Paid down $85M of debt
* **Forward Guidance:** Raised full-year guidance
Basically, they know they're struggling and they're doing everything they can to reduce debt and reverse this trend. Q3 was the last positive quarter with a spike. The spike didn't last long at all and it sold off harshly after the first month (-40% to date) but we are aiming for that 25% spike again friends.
**INSIDER ACTIVITY**
So what are the insiders doing besides failing to run their ~~scam~~ company well? Well in 2024, the insiders we're mostly buying more shares from the $7 - $10.5 range. The number of buys was also significantly higher compared to other negative growth years. Granted its mostly one insider buying over the last year but the takeaway is, if they loved the stock at $8, they should REALLY love it in the $5.
**BIG MONEY**
Go to the options chain. LEAPS. **Jan 15'27 12.5C**.
Do you see that open interest? Do you see that 10k contracts purchased at $90 a pop. Well my friends, that is a recently opened position and it was opened quite SWIFTLY. When the stock dumped last week from $6.50 to $5.30, this position was opened up quickly. This means these will print GAURANTEED.
There are also a lot of other option activity on the chain implying a big move one way or another. This one will be volatile on / after earnings day. Almost no chance it stays flat.
If you're not convinced at this point, then I'm afraid you leave me no choice but to talk about the....
**ANAL-YSTS**
There are a few analysts that cover this stock. Here are their recent ratings:
https://preview.redd.it/xjxij10rh4je1.png?width=1580&format=png&auto=webp&s=e379209b2a3e362c348328106f7fc0746643ef9a
They are still dishing out $7-$13 targets over the last half year. And I think they couldn't be more right. If this earnings is big GREEN like I predict, then the analysts will pile on with revised ratings sending it even higher.
I even emailed all the analysts covering this stock and while they did all ignore me, I got a vacation auto-response from one of them which is a BIG BULL SIGNAL. Probably on a cruise ship somewhere waiting for the big 50% gain day to drop.
**MORALITY CHECK**
Now it has to be said, I don't really care for MLM scam companies like Herbalife and ultimate would be happy to see them go bankrupt. But money is money, and by longing, I am playing both sides so that I always come out on top.
I literally can't lose!
**POSITIONS**
Opened freshly right before posting this DD:
https://preview.redd.it/y9h8yr24i4je1.png?width=332&format=png&auto=webp&s=941fd2731c9d41c9bd7a44911d99342f65bc31f5
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