Herbalife (HLF) Stock Trades Down, Here Is Why

Kayode Omotosho /
2024/04/10 12:24 pm EDT

What Happened:

Shares of health and wellness products company Herbalife (NYSE:HLF) fell 7.1% in the morning session as major indices pulled back and yields soared after the Bureau of Labour Statistics reported CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of March 2024 that came in slightly hotter than expected at 3.5% year on year (versus analysts expectations for 3.4%). According to the report, shelter and gasoline prices contributed more than half of the monthly increase in the index. 

The inflation print, while only slightly above expectations, is adding to fears that the Fed could delay rate cut plans in 2024. Following the inflation report, consensus estimate was for two rate cuts in 2024 (down from the previous consensus for three rate cuts). 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Herbalife? Access our full analysis report here, it's free.

What is the market telling us:

Herbalife's shares are a little volatile and over the last year have had 34 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

Herbalife is down 45.3% since the beginning of the year, and at $8.41 per share it is trading 55.1% below its 52-week high of $18.74 from August 2023. Investors who bought $1,000 worth of Herbalife's shares 5 years ago would now be looking at an investment worth $156.96.

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