NTRI- Analyst Gregory R. Badishkanian lowered his price target to $81 from $90 and said in a note to investors that NutriSystem could be hurt as more dieters try the new GlaxoSmithKline weight-loss drug Alli. He estimates that more than 2 million people have tried Alli since it launched in mid-June.
"Though Alli sales have likely moderated since its intro, we think NutriSystem will be impacted in the near-term," he said. But he added that the company should be able to "overcome the threat in the long-run," particularly since Alli has potential side effects and less effective weight loss.
The drug, meant to be taken with meals, blocks the absorption of about one-quarter of any fat consumed. The fat is passed out of the body, sometimes resulting in loose stools.
Comparisons to last year's third-quarter results are also difficult, Badishkanian said. Last year, the company introduced a successful campaign with football legend Dan Marino to boost sales to men. The chain's profit skyrocketed, beating Wall Street expectations.
Badishkanian said regardless of whether the company is able to post solid results in the third and fourth quarters, investors should pay close attention to NutriSystem's first quarter, since it marks the start of diet season in January.
"We think the key is for NutriSystem to set themselves up for solid growth in 2008," he said.
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