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EDiets.com Shares Decline on Downgrade
Wednesday May 17, 1:20 pm ET
Shares of EDiets.com Drop After an Analyst Downgrade

NEW YORK (AP) -- Shares of eDiets.com, a health and fitness Web site that provides information, advice, products and services, slumped Wednesday after an analyst downgraded the stock on a decline in its core subscription business.

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The company's stock fell 27 cents, or 5.1 percent, to $4.98 in midday trading on the Nasdaq, and has been moving mostly lower since reporting a slightly wider first-quarter loss and cutting its fiscal-year outlook earlier this week.

Merriman Curhan Ford analyst Richard Fetyko downgraded eDiets.com to "Neutral," saying the company's core subscription business fell more than expected. Its subscriber count dropped to 205,000 from 247,000 last year on lower subscriber acquisitions. EDiets.com plans to raise its ad spending to improve its subscriber count, the analyst said.

"With the change in strategy with respect to the core subscription business, it appears the company will spend the next few quarters getting the core business back on track while it also ramps up FreshCuisine sales and integrates Nutrio.com," Fetyko wrote in a client note.

EDiets.com agreed to acquire Nutrio.com for $8.5 million in cash, plus payments of up to $2.5 million through early 2008 based on performance milestones.

Fetyko lowered his full-year adjusted earnings per share estimate to 8 cents from 18 cents, but raised his 2006 revenue outlook to $60.4 million from $58.1 million. The analyst cut his 2007 earnings per share estimate to 18 cents from 25 cents, while revenue guidance was boosted to $85 million from $76.8 million. The sales estimates include Nutrio.com revenue of $2 million and $4.5 million for 2006 and 2007, respectively.

On Monday, eDiets.com reported a first-quarter loss of $3.6 million, or 16 cents per share, while revenue edged up to $13.8 million. The company also lowered its full-year adjusted earnings outlook to 8 cents per share from prior guidance of at least 12 cents per share.

The company's shares have been trading in a 52-week range of $3.35 to $8.60.

Elsewhere in the sector, shares of Medifast Inc., a maker of diet products and meal substitutes used for long-term doctor-supervised weight loss programs, soared $1.01, or 6.3 percent, to a 52-week high of $17.01 in midday trading on the American Stock Exchange, a day after its first-quarter profit surged. The stock has been trading in a 52-week range of $2.82 to $16.