NutriSystem gets spanked a new one, but not for bargain hunters

NutriSystem Inc. (Public, NASDAQ:NTRI) shares took the biggest hit in six years today, falling 30%+ on a reduced Q3 outlook. For those of us that have been watching this stock waiting for an entry point, the picking couldn't be sweeter.

Just check out the losses for NTRI holders from yesterday, it's beyond harsh, it's painful.

ntri losses

If I was a NutriSystem share holder before today, I would be either binging or purging on today's stock price reaction. It's Brutal.

So now that all the short money has been made, what's next?

Fellow Masters, the short percentage of NTRI's float (as of Sept. 11th, 2007) is 44.8%, that's almost half of the trading shares that bet NTRI was going to fall on their face -- and they did. Wall Street is acting like it's game over for NutriSystem, but that's hardly the case. They managed to sign up 218,000 new customers through the Internet and telephone this past quarter. Yes it is 7% less than a year earlier but they aren't dead.

Here's now the numbers work out:
Preliminary profit for the three months that ended Sept. 30 was 62 cents to 66 cents a share, less than the company's July forecast of 77 cents to 82 cents. Four analysts surveyed by Bloomberg had estimated profit of 83 cents a share. NutriSystem reports third-quarter earnings on Oct. 23rd, so the worst is really behind them.

The P/E on this stock just became attractive and despite Colin Sebastian's (of Lazard Capital) downgrade on NutriSystem Inc (NSI.ASE) from "buy" to "hold" this morning, I say "Buy".

Buy for all those that weren't in the stock before, but run for the hills if you just lost a few grand on the stock. The EPS estimates for 2007 and 2008 have been reduced from $3.48 to $3.15 and from $3.75 to $3.50, respectively. So what! These guys are still making money off of overweight Americans and will continue to do so.

If you owned NTRI before today, you hate it more than listening to a Kevin Federline CD. Because there's bad, then there's worse than Vanilla Ice bad. But if you were waiting on the sidelines like this StockMaster, now is the time to buy, buy, buy.

Friends, hate on NTRI all you want, but this stock will make a comeback. After a huge drop like this, most of the shorts are going to cash in their chips. And you know what happens when shorts cover, the stock goes up. I'm thinking it's back up to $37 by the end of next week.

Ted GottsegenArticle written by: Ted Gottsegen
Article posted on: October 4th, 2007

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