Greenberg: What You May Have Missed
SAN DIEGO (TheStreet) -- Here's what you may have missed over the past week, including insight on Herbalife, Usana and a yellow flag on Twitter.
-- Twitter is Too Arcane
-- Putting Lipstick on Ulta
-- What to Expect from HLF Probe
-- Bizarre True Tale of Usana Stock Sales
-- Why World Acceptance Probe No Surprise
From my past week:
TWITTER IS TOO ARCANE: As Twitter (TWTR - Get Report) tries to build growth in engaged users, I believe it needs to work on something else: making Twitter less arcane for new users. As I pointed out in a piece headlined "Twitter is Too Arcane," as Twitter pushes to the next level, if it wants to make itself appeal to the next-level of adopters it must make itself user friendly.
Engaged users, or monthly average users by timeline view, by the way, is perhaps the critical metric to watch when the company next reports earnings. Don't buy any of those, "but, look it's up so much from a year ago" comments (even though it isn't). This is a growth company, so it's got to show sequential growth -- from quarter to quarter -- not quarter over quarter. Any post-Oscar bump up, which was a promotional bonanza, should be viewed as a one-time event. No bump up would be nothing short of disconcerting.
Whenever I see its $28 billion valuation, which is well below its peak and not likely taking into account the full number of shares outstanding, assuming analyst are using the right number, all I can think of is how a year pre-IPO people were guessing that Twitter was valued at $10 billion, give or take a few billion. Since then, engaged users are down, the valuation is up, which is why, as much as I love Twitter, the service, I'm tossing it on my Reality Check Watch List with a yellow flag.
PUTTING LIPSTICK ON ULTA: Even after Ulta Salon (ULTA - Get Report) reported guidance that missed the expectations, investors cheered the Reality Check Watch List stock because same-store sales were weak. But as I pointed out, EPS growth guidance is going the wrong direction, gross margins are at a two-year low, gross margin guidance has been abolished and inventory continues to soar versus revenue.
WHAT TO EXPECT FROM HERBALIFE PROBE: As the battle rages on over Herbalife (HLF - Get Report), with the disclosure that the Federal Trade Commission is investigating the multi-level marketer, I make the case that even if Herbalife wins, it could still lose (as could Nu Skin (NUS), Usana (USNA - Get Report) and the entire multi-level marketing industry.
BIZARRE TRUE TALES OF USANA STOCK SALES: Speaking of Usana, as I chronicle here in the annals of disclosure screw-ups, this one takes the cake and raises more questions than it answers. At issue is Chairman and founder Myron Wentz's filing of a Form 4 with the SEC that shows the sale of shares via stock-appreciation rights after the rights had expired. As I raised questions, over the course of days, the company started amending its Form 4s to show that the rights hadn't really expired, but that the expiration date had been extended last October, even though Usana, a Reality Watch List stock, had never filed any prior document showing an extension. Reality, my opinion only: Something's off here.
WHY WORLD ACCEPTANCE PROBE SHOULDN'T BE SURPRISING: As I wrote, the surprise would've been if the Consumer Financial Protection Bureau didn't investigate this 200% installment lender. Here's the best part. On Friday, after the market closed, the Stern Agee analyst sliced his price target on the stock to $75 from $105, slicing his price target on the basis that it's "waiting for CFPB issues to pass." Nothing like trying to sneak out through the back door. Oh, and for trivia buffs, the chairman of the audit committee at Conn's was, until late last year, the CFO of World.
-- Written by Herb Greenberg in San Diego