Multi-level marketing (MLM) skincare and body shaping systems maker
Nu Skin Enterprises Inc. (NYSE: NUS) shares have been on a tear in anticipation of its Q4 innovation launch of products. The stock has outperformed the benchmark
S&P 500 index (NYSEARCA: SPY). The stay-at-home mandates to stop the spread of COVID-19 has been a boon for MLM companies that leverage the social relationships of its members to sell products. The platform migration to e-commerce has also accelerated top and bottom line growth in the age of coronavirus. While shares are lofty, prudent investors should look for opportunistic pullbacks especially from a sell-the-news type reaction in shares upon launch or its new pipeline of products.
Q2 FY 2020 Earnings Release
On Aug. 05, 2020, Nu Skin released its fiscal second-quarter 2020 results for the quarter ending June 2020. The Company reported an earnings-per-share (EPS) profit of $0.81 excluding non-recurring items versus consensus analyst estimates for a profit of $0.65, beating estimates by $0.16. Revenues fell (-1.8%) year-over-year (YoY) to $612.4 million beating analyst estimates for $606.96 million. The Company experienced a surge from the west in America and EMEA regions. China showed stabilization with sequential growth.
Conference Call Takeaways
Nu Skin CEO, Ritch Wood, expounded on the core mechanics of their “social-enabled business model”. The investments in technology and digital tools paid off handsomely in Q2. The Company saw 29% growth in customers and digital transactions growing to over 85% YoY. The product launch of ageLOC Boost and Nutricentials are expected to drive 2H 2020 metrics. Social sharing is a powerful phenomenon that was further bolstered because of the pandemic. The manufacturing segment grew by 20% YoY as the Company bolstered capacity to meet the growing demand in the sanitizing and cleansing category. Nu Skin leveraged the power of social media, influencers, gig economy and affiliate marketing to generate a perfect storm of robust growth that will accelerate stronger with the introduction of new products in 2H 2020.
Digital Revolution Bolsters Forward Guidance
Nu Skin raised Q3 guidance and full year guidance for 2020. The Company sees Q3 EPS in the range of $0.78 to $0.88 versus $0.68 consensus analyst estimates with revenues coming in at $605 million versus $575.94 million consensus estimates. For full year 2020, the Company raised EPS guidance to $2.85 to $3.15 from previous guidance of $2.05 to $2.35 versus $2.45 consensus analyst estimates. Full year 2020 revenues are expected to be in the range of $2.37 billion to $2.45 billion versus $2.32 billion consensus estimates. Digital adaption and the sheer increase in time that consumers are spending online has bolstered product demand with digital transactions accounting for 90% of Q2 2020 transactions. The Company’s digital transformation was able to offset the traditional face-to-face and in-person meetings. Product mix expanded from sales of socially shareable products like AP-24 toothpaste and Insta Glow Sunless Tanner to device systems like LumiSpa which saw 96% YoY sales growth in the America and Pacific region. The EMEA region saw 51% YoY customer growth lead by U.K., Germany, Poland and South Africa with 85% of global sales performed through digital transactions.
ageLOC Boost and Nutricentials Launch
The Company anticipates strong demand for its next-gen beauty device innovation ageLOC Boost, a “proprietary microcurrent device that promotes brighter, more youthful-looking skin” according to Nu Skin President Ryan Napierski. Nu Skin will preview the new bioadaptive skincare line under the Nutricentials brand in Q4 2020 and launch in the first-half of 2021. The Company continues to growth in its enJoy customer loyalty rewards program.
NUS Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provides a broader view of the landscape for NUS stock. The monthly rifle chart has been in an explosive uptrend as the monthly stochastic nears the 80-band with the rising 5-period moving average (MA) support near the $47.88 Fibonacci (fib) level. The monthly market structure low (MSL) triggered at $22.76 and weekly MSL triggered on the breakout through $29.50. The weekly stochastic squeezed through the 80-band in June and has been floating above the 80-band for nearly five months. The shares are over bought as short-sellers have been taken to the woodshed. Prudent investors must practice patience and discipline for the inevitable weekly stochastic 80-band slip likely on a sell-the-news reaction to look for opportunistic pullback levels at the $47.88 monthly 5-period MA/fib, $44.80 fib, $40.50 fib and the $37.94 fib. The bar is set very high for its upcoming earnings release in early November 2020. Rather than chase, watch for the potential sell-the-news reaction to seek exposure.
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