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Medifast Trades Near 52-Week Low: Buy, Hold or Sell MED Stock?
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Medifast, Inc. (MED - Free Report) has seen its shares dive 48.9% in the past six months against the industry’s growth of 0.6%. This weight management and healthy living product company has also trailed the broader Zacks Consumer Staples sector and the S&P 500’s respective growth of 6.4% and 6.5%. Closing the trading session at $18.26 on Wednesday, the stock hovers close to its 52-week low of $17.73.
This significant decline in Medifast's stock price can be attributed to several factors that have weighed on the company’s performance and outlook. Let’s delve deeper.
Image Source: Zacks Investment Research
Medifast Battles Customer Acquisition Challenges
Medifast has been encountering difficulties in attracting customers due to macroeconomic challenges, including intense competition in the health and wellness space, the disruptive effects of GLP-1 regimen adoption and a general slowdown in consumer spending. The weight loss market has experienced significant changes, with the adoption of medically supported weight loss accelerating more rapidly than anticipated.
In the second quarter of 2024, revenues of $168.9 million declined 43.1% year over year due to lesser active earning OPTAVIA Coaches and reduced productivity per Coach. The average revenue per active earning OPTAVIA Coach stood at $4,972, down 10.9% from $5,578 million due to lower customer acquisition.
The total number of active earning OPTAVIA Coaches fell 36.2% to 33,900 compared with 53,100 in the year-ago quarter. The abovementioned macroeconomic hurdles are likely to persist in the near term. The company expects third-quarter 2024 revenues to range between $125 million and $145 million, reflecting a continued decline in the number of active earning OPTAVIA Coaches. This decrease is attributed to near-term challenges in customer acquisition due to the growing acceptance of GLP-1 medications in the marketplace.
Operational Costs: A Concern for MED
Medifast has been battling rising SG&A costs for a while, which is denting its profits. As the operating landscape remains difficult, Medifast intends to make significant spending to boost customer acquisition. These initiatives involve strategic investments in marketing and product development, which are crucial for driving long-term growth. However, these investments may negatively affect EPS in the short term.
The company expects to incur a loss in the band of 5-70 cents per share for the third quarter. This forecast accounts for an anticipated expenditure of $9 million on company-led marketing initiatives and an additional $4 million for the coach convention.
Can Growth Strategies Turn the Tide for Medifast?
Medifast is strategically positioning itself to thrive in the rapidly evolving weight loss market, as the adoption of GLP-1 medications reshapes industry dynamics. Although short-term pressures are anticipated, Medifast's proactive initiatives are expected to positively impact its top-line performance by late this year and into 2025. With projections indicating that up to 20 million people in the United States could be using GLP-1 medications by 2030, Medifast is seizing this transformative opportunity by aligning its efforts with the market's evolving needs.
The company's holistic approach, integrating customers, coaches and clinicians through LifeMD, positions it to support GLP-1 users in achieving their long-term health goals. With its financial strength, strategic flexibility and expertise, Medifast is well-equipped to adapt and thrive in this evolving market, positioning itself effectively against competitors and capitalizing on substantial growth opportunities.
Medifast diligently pursues a strategic vision aimed at driving long-term growth. This vision encompasses several key initiatives, including the cultivation of product and program innovation, expansion into diverse market segments and geographies, refinement of coach and client experiences, harnessing in-depth data and insights and streamlining operational efficiency. In executing these strategies, Medifast places immense focus on the introduction of innovative and compelling products and programs.
The company adopts a systematic approach to penetrate global markets and explore adjacent product opportunities. A core element of Medifast's growth strategy involves scaling up through organizational enhancements, system optimizations, process improvements and strategic alliances. Medifast is focused on developing a culture that drives attraction, engagement and loyalty. Also, the company has been working toward data-driven decision-making.
How Should Investors Play MED Stock?
Medifast is currently navigating a challenging phase marked by significant stock declines, heightened competition and macroeconomic pressures affecting its customer acquisition and revenue growth. However, the company is taking proactive steps to realign its strategy and capitalize on emerging market opportunities. Potential investors should closely monitor Medifast’s progress and look for a more opportune moment to invest. For current shareholders, retaining the stock appears prudent, given the company’s long-term growth potential. Medifast presently carries a Zacks Rank #3 (Hold).
Top 3 Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Ollie's Bargain Outlet (OLLI - Free Report) and Flowers Foods (FLO - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.7%, respectively, from the year-earlier figures.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.
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Medifast Trades Near 52-Week Low: Buy, Hold or Sell MED Stock?
Medifast, Inc. (MED - Free Report) has seen its shares dive 48.9% in the past six months against the industry’s growth of 0.6%. This weight management and healthy living product company has also trailed the broader Zacks Consumer Staples sector and the S&P 500’s respective growth of 6.4% and 6.5%. Closing the trading session at $18.26 on Wednesday, the stock hovers close to its 52-week low of $17.73.
This significant decline in Medifast's stock price can be attributed to several factors that have weighed on the company’s performance and outlook. Let’s delve deeper.
Image Source: Zacks Investment Research
Medifast Battles Customer Acquisition Challenges
Medifast has been encountering difficulties in attracting customers due to macroeconomic challenges, including intense competition in the health and wellness space, the disruptive effects of GLP-1 regimen adoption and a general slowdown in consumer spending. The weight loss market has experienced significant changes, with the adoption of medically supported weight loss accelerating more rapidly than anticipated.
In the second quarter of 2024, revenues of $168.9 million declined 43.1% year over year due to lesser active earning OPTAVIA Coaches and reduced productivity per Coach. The average revenue per active earning OPTAVIA Coach stood at $4,972, down 10.9% from $5,578 million due to lower customer acquisition.
The total number of active earning OPTAVIA Coaches fell 36.2% to 33,900 compared with 53,100 in the year-ago quarter. The abovementioned macroeconomic hurdles are likely to persist in the near term. The company expects third-quarter 2024 revenues to range between $125 million and $145 million, reflecting a continued decline in the number of active earning OPTAVIA Coaches. This decrease is attributed to near-term challenges in customer acquisition due to the growing acceptance of GLP-1 medications in the marketplace.
Operational Costs: A Concern for MED
Medifast has been battling rising SG&A costs for a while, which is denting its profits. As the operating landscape remains difficult, Medifast intends to make significant spending to boost customer acquisition. These initiatives involve strategic investments in marketing and product development, which are crucial for driving long-term growth. However, these investments may negatively affect EPS in the short term.
The company expects to incur a loss in the band of 5-70 cents per share for the third quarter. This forecast accounts for an anticipated expenditure of $9 million on company-led marketing initiatives and an additional $4 million for the coach convention.
Can Growth Strategies Turn the Tide for Medifast?
Medifast is strategically positioning itself to thrive in the rapidly evolving weight loss market, as the adoption of GLP-1 medications reshapes industry dynamics. Although short-term pressures are anticipated, Medifast's proactive initiatives are expected to positively impact its top-line performance by late this year and into 2025. With projections indicating that up to 20 million people in the United States could be using GLP-1 medications by 2030, Medifast is seizing this transformative opportunity by aligning its efforts with the market's evolving needs.
The company's holistic approach, integrating customers, coaches and clinicians through LifeMD, positions it to support GLP-1 users in achieving their long-term health goals. With its financial strength, strategic flexibility and expertise, Medifast is well-equipped to adapt and thrive in this evolving market, positioning itself effectively against competitors and capitalizing on substantial growth opportunities.
Medifast diligently pursues a strategic vision aimed at driving long-term growth. This vision encompasses several key initiatives, including the cultivation of product and program innovation, expansion into diverse market segments and geographies, refinement of coach and client experiences, harnessing in-depth data and insights and streamlining operational efficiency. In executing these strategies, Medifast places immense focus on the introduction of innovative and compelling products and programs.
The company adopts a systematic approach to penetrate global markets and explore adjacent product opportunities. A core element of Medifast's growth strategy involves scaling up through organizational enhancements, system optimizations, process improvements and strategic alliances. Medifast is focused on developing a culture that drives attraction, engagement and loyalty. Also, the company has been working toward data-driven decision-making.
How Should Investors Play MED Stock?
Medifast is currently navigating a challenging phase marked by significant stock declines, heightened competition and macroeconomic pressures affecting its customer acquisition and revenue growth. However, the company is taking proactive steps to realign its strategy and capitalize on emerging market opportunities. Potential investors should closely monitor Medifast’s progress and look for a more opportune moment to invest. For current shareholders, retaining the stock appears prudent, given the company’s long-term growth potential. Medifast presently carries a Zacks Rank #3 (Hold).
Top 3 Staple Stocks
Here, we have highlighted three better-ranked food stocks — The Chef's Warehouse (CHEF - Free Report) , Ollie's Bargain Outlet (OLLI - Free Report) and Flowers Foods (FLO - Free Report) .
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.7% and 12.7%, respectively, from the year-earlier figures.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2. FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings implies growth of around 1% and 4.2%, respectively, from the year-ago reported numbers.