Why GNC Holdings Inc. Shares Could Stall

Does this analyst make a good case? Or is it just more noise from Wall Street?

Jul 17, 2014 at 8:47AM

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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Brian Pacampara has no position in any stocks mentioned.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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