NutriSystem heads back to where it should be

NutriSystem (NTRI) shares went up 3.8% today to close at $62.12. After hours shares dropped less than 1% but for NutriSystem investors this finally comes with a sigh of relief.

Just last week they beat Q1 estimates with a 70% rise in profits. Revenues increased 62% to $238 million in when compared to Q1 06 revenue of $146 million. The delayed reaction to finally moving the share price could be that NTRI shares have already gone up %16 in the last month. Last Friday Avondale Partners raised their price target from $80 to $88 and they are maintaining their "market outperform" rating on NutriSystem Inc. On the same day Colin Sebastian of Lazard Capital reiterated his "buy" rating on NTRI and raised his target price from $75 to $80. So with shares trading in the low $60’s and the powers-that-be saying it will get to at least $80 a share, there appears to be money to be made.

The future also looks good for NutriSystem, they expect Q2 earnings of 82 cents to 86 cents a share and revenue of $190 million to $200 million. They are also looking to add at least 210,000 new Direct channel customers in the second quarter. Wall Street was projecting Q2 to be earnings of 70 cents a share on revenue of $171.7 million.

So America, if Shelley can lose 76 lbs. with NutriSystem, you can certainly gain $20 a share before the end of 2007. No matter what happens this year with the stock market, people are still going to flock to NutriSystem because they want to look and feel good. Even if NTRI’s business slows down, the stock is trading at such a good premium right now that it makes me want to celebrate by eating a dozen doughnuts.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.