Herbalife stock forms rare triangle pattern pointing to a drop to $5

Core Viewpoint - Herbalife's stock price has significantly declined, dropping from $61.65 in February 2019 to $6.25, marking its lowest level since 2009, raising questions about its investment potential [1] Group 1: Reasons for Stock Decline - Herbalife operates in the multi-level marketing industry, relying on a large team of sellers to generate business, selling products like supplements and snacks [2] - The company's popularity surged when billionaires Bill Ackman and Carl Icahn took opposing positions on the stock, with Ackman shorting it and accusing it of being a pyramid scheme [2] - Ackman eventually closed his position, incurring a loss of over $1 billion, while Icahn's subsequent sale of his stock led to a significant sell-off [3] Group 2: Financial Performance - Herbalife's annual revenue decreased from $5.8 billion in 2021 to $4.933 billion last year, reflecting a slowdown in business [4] - Recent results indicated a 0.6% drop in net sales to $1.2 billion, with expectations of continued decline due to competition from weight loss drugs by companies like Eli Lilly and Novo Nordisk [4] Group 3: Turnaround Strategy - The company is implementing a turnaround strategy, appointing Stephan Gratziani as the new CEO and committing to reduce its debt by $1 billion to $1.4 billion by the end of 2028 [5] - Analysts project a slight revenue decline in the first quarter to $1.22 billion and a further drop to $1.27 billion in the second quarter, with an annual revenue forecast of $4.94 billion this year and $5.14 billion next year [6] Group 4: Profit Expectations - Herbalife's expected annual profit per share is $1.98 this year, increasing to $2.51 next year, with analysts generally optimistic about the stock's performance [7] Group 5: Technical Analysis - The stock has been in a strong bearish trend, falling from a high of $58.95 in 2021 to the current $6.25, forming a descending triangle pattern, which is typically a bearish signal [11][12] - The stock remains below the 50-week moving average, suggesting potential further declines, with a psychological target of $5, approximately 20% below the current level [12]