NEW BEARISH Plays
Nu Skin Enterprises - NUS - close: 38.28 change: -1.12
Stop Loss: 41.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 17, 2014
Time Frame: 8 to 12 weeks
Average Daily Volume = 1.78 million
New Positions: Yes, see below
Why We Like It:
NUS is in the consumer goods sector. They make and sell personal care products. What makes NUS an interesting story is that they're part of the multi-level marketing industry.
Multi-level companies have come under fire in recent years. Herbalife (HLF) gets a lot of headlines with some big investors calling HLF a pyramid scheme. NUS was under investigation in China but seemed to get off the hook with only a minor fine a few months ago. Whatever your opinion of multi-level companies the business outlook for NUS is challenging.
NUS has guided lower (a.k.a. earnings warning) four quarters in a row. Their most recent quarterly report was November 5th. They beat Wall Street earnings estimates of $0.93 a share with a profit of $1.12 but that is still down -37% from a year ago period.
Revenues were down -29.7% to $638.8 million. The company reported that sales slowed in all geographical regions. They had lower revenues, lower margins, and struggled with currency fluctuations.
NUS management then guided lower for the fourth quarter. They expect a profit in the $0.72-0.77 range versus analysts' estimates in the $1.01 range. NUS lowered their Q4 revenue guidance into the $590-610 million versus consensus estimates of $659 million.
There was also a story that came out a few hours before NUS' Q3 results that NUS has confirmed an undisclosed SEC probe into the company. That's never good news.
There are also rumors that NUS is suffering serious cash flow issues and has years worth of inventory.
All of this bad news sparked a big drop in NUS' stock. The oversold bounce has failed. Now shares are breaking down under key support near $40.00. The next level of support could be in the $32-30 zone. The point & figure chart is bearish with a $25.00 target.
Tonight we are suggesting a trigger to open bearish positions at $37.90 with a stop loss at $41.55. NUS can be a volatile stock so I am suggesting we limit our position size to reduce risk. You may want to use put options to limit risk to the cost of your option.
Trigger @ $37.90 *small positions to limit risk*
- Suggested Positions -
Short NUS stock @ $37.90
- (or for more adventurous traders, try this option) -
Buy the 2015 Jan $35 PUT (NUS150117p35) current ask $2.45
Option Format: symbol-year-month-day-call-strike