A crackdown on Nu Skin (NYSE:NUS) in China sent its shares 9% lower on the week. It firmly establishes a downtrend that saw its stock fall 33% year-to-date. With Nu Skin’s prospects appearing very dim, what should investors do?
Nu Skin forecast Q2 EPS of $0.82 - $0.84. Revenue will be in the range of $622M - $623M, sharply below the $672M consensus. The company said China has a 100-day campaign to review and inspect its products and selling practices.
In effect, Chinese regulators think Nu Skin is an MLM – multi-level marketing. If the company is most certainly a pyramid scheme, the stock may easily fall to the $25-$30, levels not seen since 2016.
In the first quarter, 33% of Nu Skin’s revenue came from Mainland China. America/Pacific, South Korea, and Southeast Asia are the other markets that helped it drive customer acquisition higher by 10%. The salesforce fell from 63,498 last year (Q1/2018) to 63,248 but revenue grew.
Investors need to weigh the risks of China slowing or shutting Nu Skin down in the region against the long-term sales growth potential. Investors who already hold the stock at a loss may want to exit the position and wait for uncertainties to clear before investing in Nu Skin.
