Why GNC Holdings Inc. Shares Could Stall

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of GNC Holdings  (NYSE: GNC  ) slipped about 1.5% in premarket trading Thursday after Jefferies downgraded the health supplements retailer from buy to hold.

So what: Along with the downgrade, analyst Mark Wiltamuth lowered his price target to $39 (from $50), representing about 10% worth of upside to yesterday's close. So while momentum traders might be turned off by GNC's year-to-date price weakness, Wiltamuth's call could reflect a sense on Wall Street that its growth prospects are just too limited to trigger a significant rebound.

Now what: Jefferies lowered its 2014 EPS estimate for GNC from $3.07 to $3.00 and its 2015 view from $3.56 to $3.35. "We have been wrong on GNC as we've been caught in a value trap waiting for sales to snap back. Industry data now suggests a broader slowdown is under way," said Wiltamuth. "We see risk of a near-term earnings disappointment and with industry sales trends weaker, analysts may have to rethink 2015 estimates and long-term growth rates. While valuation is at record lows, we fear EPS estimates are still falling." With the stock flirting with its 52-week lows and currently sporting a forward P/E of 10, however, those short-term concerns might be providing patient Fools with a healthy long-term opportunity.

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