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The stock has corrected sharply after missing the

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investora2z   Saturday, 11/30/13 06:36:36 AM
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The stock has corrected sharply after missing the analyst estimates for the third quarter. The net loss was slightly more than estimates, and the revenues were a little more off than what the market had anticipated. Even the last earnings had led to a negative reaction. Consecutive quarters of performance below expectations has weakened the sentiments significantly. It has managed to bounce from the critical level of around $5, but the volumes have been going down. So the recovery is weak, and it will require improvement in fundamentals to reverse the sentiments. However, the company has been showing improvement by reducing the losses. In Q3, the losses declined sequentially and on a yoy basis. The revenues also increased on a yoy basis, though they declined sequentially. Operationally, it added 2% lesser customers in Q3, but the total active customers increased by 6% to 2.1 million. For the first nine months of 2013, the net sales was $285 million compared to $245 million in the first nine months of 2012. The net loss also declined from $15.9 million to $10.9 million during the same period. So though the company is unable to exceed street expectations, there have been improvements. However, net profit is still elusive, and is likely to remain so for some time unless there is some remarkable improvement. Cash and equivalents have also declined from $32 million on December 31, 2012 to $19.23 million on September 30. Overall vitamins / supplements / wellness market is expected to grow at a healthy pace, and Vitacost can take leverage this to its advantage. The growth potential is evident from the success of MusclePharm (MSLP) which has moved from near zero to $100 million revenues in a few years. To improve the sentiments, Vitacost needs to deliver positive surprises in the next few quarters. Otherwise the stock may remain weak.

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