2. Medifast, Inc. (NYSE:MED)
% of Institutional Ownership: 106.93%
Float Shorted: 32.32%
Medifast, Inc., through its subsidiaries, manufactures and sells weight reduction, weight management, and healthy living products in the United States and Asia. Under the brand names OPTAVIA, OPTAVIA ACTIVE, and Optimal Health, it sells bars, puffs, cereal, crunchers, beverages, hearty options, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups. Medifast has a float short of 32.32% as of June 20.
Revenue in the first quarter of 2024 fell 49.9% to $174.7 million from $349.0 million in the first quarter of 2023, owing primarily to a drop in the number of active earning OPTAVIA Coaches, lower Coach productivity, and a $9.1 million impact from a timing difference due to modifications to the company’s sales order terms and conditions with its customers realized in the first quarter of 2023. Net income for the first quarter of FY2024 was $8.3 million ($0.76 per diluted share), a significant decrease from $40.0 million ($3.67 per diluted share) in Q1 2023.
Additionally, the gross profit dropped by 48.3% to $127.3 million from $246.4 million in the first quarter of 2023. The decline in gross profit was caused by lower revenue, which was countered by cost reductions from Fuel for the Future programs and improved inventory management. Medifast is working on developing the OPTAVIA offering to include comprehensive assistance for customers who want to employ GLP-1 medical weight reduction treatments, targeting a market expected to be worth $50 billion or more by 2030.
The company also emphasizes that its model’s holistic approach, including habit-based and Coach-guided solutions along with nutrition products and community support, makes it different from its competitors. Looking forward, the business anticipates that revenue for the second quarter of 2024 will be between $150 million and $170 million, and diluted EPS will range between $0.05 and $0.40.
As of June 21, Medifast has seen its stock decrease by more than 84% over the past 5 years, whereas the S&P 500’s gain was more than 85%. Analysts’ consensus rating for Medifast, Inc. (NYSE:MED) is “Moderate Sell”.
Miller Value Income Strategy explained why it sold Medifast, Inc. (NYSE:MED) in its first quarter 2024 investor letter:
“When the Strategy is performing well and valuations in the portfolio remain as low as they are, we are hesitant to make many changes. However, remaining vigilant against investment mistakes and constantly searching for ways to improve the portfolio are both critical components of the process. This past quarter, we eliminated two mistakes and two winners that were approaching fair value. We liquidated what was left of Medifast, Inc. (NYSE:MED) after continued struggles in the face of weight loss drugs.”
14 out of the 920 hedge funds in Insider Monkey’s database had stock in Medifast, Inc. (NYSE:MED), a decrease from 16 hedge funds in the previous quarter. Israel Englander’s Millennium Management is the largest stakeholder in the company, with 300,497 shares worth $11.52 million.
