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Morgan Stanley Cuts Estimates for Herbalife By 30%, Bill Ackman Is Rejoicing

BILL ACKMAN screen shot

Bill Ackman is probably rejoicing or feeling his prophecy is going to be fulfilled as Barclay’s analyst Meredith Adler slashed earnings projections for the health shake maker by 30 percent. Activist investor Bill Ackman has been railing against the company for two years now, calling it a pyramid scheme and alleging the company’s representatives make false claims. Herbalife’s management has accused Ackman of possible stock manipulation, and say he is slandering the company to prop up his large short position, as reported by the New York Post.

However, aggressive downgrade from Adler is not mainly because of Ackman, but because the strong dollar is going to put pressure on the company, many of whose agents are overseas. In addition, management said it needs to recruit more representatives. The company’s management said it expected a slow year even before Ackman predicted 2015 will be the year Herbalife disappears, and he could stand to make $1 billion if the company’s stock goes to zero.

Adler slashed estimates for earnings to $322 million, down from $509 million. She expects another decline for 2016, but a smaller one, at $309 million. Shares tumbled 57% in 2014.

To combat criticism of extravagant claims made by salespeople, Herbalife is putting in place “more stringent rules” concerning claims that can be made about its products.

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