What Happened?
Shares of wellness company Medifast (NYSE: MED) jumped 3.9% in the afternoon session after the release of a favorable Consumer Price Index (CPI) report, which showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales. A Federal Reserve official's comments on the same day, noting that consumer spending fundamentals remain solid, further bolstered investor confidence in the sector's resilience.
After the initial pop the shares cooled down to $13.36, up 4.1% from previous close.
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What Is The Market Telling Us
Medifast’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 4.1% on the news that the company reported second-quarter financial results that surpassed analyst expectations. The company's revenue of $105.6 million and earnings per share of $0.22 both came in ahead of Wall Street's forecasts. This performance marked a significant turnaround in profitability, as the company posted a net income of $2.5 million compared to a net loss of $8.2 million in the same quarter of the previous year. These results arrived despite a 37.4% year-over-year drop in revenue, driven by a 32.7% decrease in active coaches. Investors appeared to overlook weak guidance for the upcoming quarter, focusing instead on the earnings beat and a strong balance sheet that reported $162.7 million in cash with no debt.
Medifast is down 22.7% since the beginning of the year, and at $13.36 per share, it is trading 38.6% below its 52-week high of $21.76 from December 2024. Investors who bought $1,000 worth of Medifast’s shares 5 years ago would now be looking at an investment worth $81.69.
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