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NutriSystem To Battle New 'Diet Pill'
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The diet food company NutriSystem might be making a comeback from its recent downfall. The stock price reached its peak this calendar year in mid-July at $72.93, then plummeted in recent weeks to as low as $47.30. Diet industry competitors such as Weight Watchers International and eDiets.com. had experienced similar trends.
Today, the NutriSystem stock price has climbed 2.40% to $51.35 per share. Analysts rate this stock "buy" due to its steller gains over the past few days.
Despite reports of high earnings for the second quarter, many diet companies saw their stock prices hit as a result of a new product entering the weight loss market. Alli, also known as Orlistat OTC, is the first and only Food and Drug Administration-approved weight loss pill. GlaxoSmithKline introduced the new drug in early February of this year, claiming that Alli users can lose up to 50% more weight than those who attempt the same feat via diet and exercise alone.
According to analysts, the introduction of Alli caused investors to pull out of other major diet industry leaders over the past several months. The initial hype of a quick fix to weight problems had a strong affect on the industry given the credibility of the FDA approval. GlaxoSmithKline (nyse: GSK - news - people ) saw a jump in their stock price corresponding with the time of Alli's release, but "sales have flat lined since the initial rush" says Sameet Sinha, and analyst at Kaufman Bros. While Alli hit the market with a running start, the product has already dropped from its position as the leading weight loss product, allowing competitors, like NutriSystem, to get back in the game.
"The introduction of Alli to the weight loss industry is the primary reason for NutriSystem's recent decline," says analyst Colin Sebastian of Lazard Capital Markets. However, the initial concerns that caused investors to pull their support from NutriSystem have been assuaged, as proven by increasing stock value over the last few days. "This company has proven that they can overcome short term setbacks," says Sinha.
NutriSystem has an interesting niche in the weight loss industry in that the pre-measured, pre-packaged food is delivered directly to the consumer, unlike Weight Watchers, for instance, which requires participants to attend meetings at local weight loss clinics. According to Lazard's Sebastian, NutriSystem is on the rebound, and therefore currently a wise investment. Thus, despite recent setbacks, this diet company is currently gaining momentum.
Source: ForbesAll rights reserved.