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Ackman Short Herbalife May Jump 26% More in Analyst Views

Billionaire Investor Bill Ackman
Bill Ackman, founder and chief executive officer of Pershing Square Capital Management LP, speaks during an event in New York, on July 22, 2014. Ackman called Herbalife Ltd. a “criminal enterprise” in the three-hour presentation complete with a slide show. Photographer: Jin Lee/Bloomberg

July 23 (Bloomberg) -- Not to digress, but it’s sort of funny that an analyst would give an “overweight” rating to a company that sells diet shakes.

Anyway, that’s the view from Barclays Plc’s Meredith Adler, whose $94 price target on Herbalife Ltd. is the highest on Wall Street and implies another 39 percent rally in the shares from yesterday’s close. The average 12-month price estimate is $85.50, which would be a 26 percent gain, according to data compiled by Bloomberg. (That’s based on four estimates made in the last three months. By comparison, Apple Inc. has 46.)

She’s not alone with the bullish view despite the verbal bashing the company has taken from billionaire investor Bill Ackman, who yesterday called Herbalife a “criminal enterprise” in a three-hour presentation complete with a slide show. Herbalife responded by saying it may sue him.

All told, there are five ratings that are equivalent to “buy” on Herbalife, three “holds” and zero “sells,” giving the stock a consensus rating of 4.25 in a system where buy ratings score a 5 and sells score a 1. That puts it in the top quarter of companies in the Russell 1000 Index. Barclays’s Adler declined to comment.

‘Remain Positive’

“We remain positive on the name,” Rommel Dionisio, an analyst at Wedbush Securities, said in an e-mail. “We continue to view Herbalife as a well run company, with a viable long term business model and significant potential to expand in emerging markets around the globe.”

It is important to note that in the options market, where Ackman has laid his bet against Herbalife, the signs aren’t as bullish after Herbalife’s 25 percent rally yesterday. Puts betting on a 10 percent drop in Herbalife jumped to a record 15.08 points more than calls priced 10 percent above the shares yesterday, according to implied volatility on three-month contracts.

Of course, Chicago really is a great town for food. Can’t blame all the options traders out there for being in no mood for a diet shake.

To contact the reporter on this story: Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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