Olivier Colombo - Consultant & Corporate Advisor
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Stock pick for August 15th, 2013 is MusclePharm (MSLP) - Price Target 15$

MusclePharm (MSLP) Founded in 2008, is a healthy lifestyle company that develops and manufactures nutritional supplements that address active lifestyles, including muscle building, weight loss and maintaining general fitness through a daily nutritional supplement regimen.

MSLP has grown rapidly over the past few years, producing 2012 revenue of $67 million, up from $17 million in 2011 and $4 million in 2010. Growth is expected to continue in 2013, with sales conservatively expected to reach over $100 million. (I believe they will end the year with revenues of 110Mil$ based on the strength of the first half of the year)

Has currently 20 products that are formulated through a six-stage research processusing the expertise of leading nutritional scientists, which are field tested using a pool of several elite athletes on various professional teams. A wide-range variety of nutritional supplements, include Assault, Combat Powder, MusclePharm Musclegel, MusclePharm Shred Matrix, and Re-Con. These products are comprised of amino acids, herbs,and proteins tested by our scientists for the overall health of athletes. They developed these nutritional supplements to enhance the effects of workouts, repair muscles, and nourish the body for optimal physical fitness.

The nutritional supplements are available for purchase in over 10,000 U.S. retail outlets, including Dick's Sporting Goods, GNC, Vitamin Shoppe and Vitamin World. Co also sells products to over 100 online channels, including bodybuilding.com, amazon.com, gnc.com and vitacost.com. Is the official sports nutrition poartner of the UFC (Ultimate Fighting Corporation). Internationally, their nutritional supplements are currently sold in over 110 countries, and expects that international sales will be a significant part of their sales for the foreseeable future.

According to BBC Research, the global market for sports nutrition products increased from approximately $28 billion in 2007 to more than $31 billion in 2008 and is forecast to reach $91.8 billion by 2013. That’s a compound annual growth rate of more than 24%.
At the end of Q2 2013, the Company had approximately $8.7 million of cash and cash equivalents, approximately $21.7million in current assets, and no long-term debt. Shareholders'equity at June 30, 2013 increased to $12.6 million as compared to ($9.8million) at December 31, 2012. As of August 13, 2013, there were approximately10.1 million shares of common stock outstanding and 145,000 shares of Series D Convertible Preferred stock outstanding which are convertible into a total of290,000 shares of common stock. 

Primary growth strategy is to:
  • increase our product distribution and sales through increased market penetrations both domestically and internationally
  • increase our margins by focusing on streamlining our operations and seeking operating efficiencies in all areas ofour operations
  • continue to conduct additional testing of the safety and efficacy of our products and formulate new product
  • increase awareness of our products by increasing our marketing and branding opportunities through endorsements,sponsorships and brand extensions.
Marketing strategy: To brand MusclePharm as the "must have" fitnessbrand for workout enthusiasts and elite athletes. Co seeks to be known as theathlete's company, run by athletes who create their products for other athletes both professional and otherwise. Believes that their marketing mix of endorsers,sponsorships and providing sample products for our retail resellers to use isan optimal strategy to increase sales.

14th of August 2013 company reported Q2 Sales: Gross sales increased approximately $9.6 million or 51% to $28,516,000 for the three months ended June 30, 2013, compared to $18,869,000 for the three months ended June 30, 2012. The increase in sales was due primarily to increased awareness of their product brand, combined with hiring additional sales and marketing staff, and adding new products in an effort to expand our customer base. Since inception, the Co has focused on an aggressive marketing plan to penetrate the market. Assuch, significant promotional expenditures have been made to increase produc tsales through adding new customers and expanding our product line.

In this quarter the Company launched a women's line named FitMiss. The momentum is beginning to show increasing sales for this new product line. The Company believes it has a good position for market share with a women's line ofproducts. The Company is also considering other new products.  

Net sales increased approximately $10.1 million or 65% to $25,480,000 for the three months ended June 30, 2013,compared to $15,429,000 for the three months ended June 30, 2012. A significant growth area for the Company was nutritional product sales in international markets. International sales are included in the results of operations and increased approximately $3.5 million or 56% to $9,833,000 for the three months ended June 30, 2013,compared to $6,302,000 for the three months ended June 30, 2012.

GrossProfit increased approximately $5.4 million or 218% to $7,913,000 for the three months ended June 30, 2013,compared to $2,487,000 for the three months ended June 30, 2012. The gross profit percentage increased to approximately 31% of net sales during the three months ended June 30, 2013,from 16% for the three months ended June 30, 2012. This increase was primarily due to the reduction in discounts as a percentage of sales, new product pricing from our Tennessee manufacturer, and the reduction of shipping costs.
The Company's management believes current levels of liquidity are sufficient for current operations, but additional capital may be needed to execute the business plan, which includes buying more inventory. There can be no assurance that such capital will be available on acceptable terms or at all.
Recent Company highlights include:

  • On August the Company closed a $2.5 million common stock offering. MusclePharm entered into subscription agreements with accredited investors whereby it sold 238,096 restricted shares of its common stock at $10.50 per share.  The Frost Group, LLC ("Frost"), headed by Miami entrepreneur Dr. Phillip Frost, was the lead investor in the offering. This marks the second investment Frost has made in MusclePharm. In February 2013, Frost invested $2.9 million as the lead investor in MusclePharm's previously completed $12 million financing.

  • In August, the Company announced an agreement with Costco Wholesale Corporation, the leading warehouse club operator, to carry MusclePharm's Combat Protein Powder® nationwide in all 430 Costco stores beginning late October 2013. This new distribution channel expands MusclePharm's reach beyond specialty health, nutrition and sports stores and online retailers to mass consumer channels. Costco will begin rolling out Combat in its international locations in the later part of 2014 and early 2015.

  • In July, the Company announced it signed a first-of-its-kind partnership with the Mr. Universe, Mr. World and Mr. Olympia title holder, actor, entrepreneur and former Governor of California, Arnold Schwarzenegger. As part of the collaboration, MusclePharm will launch the Arnold Series, an exclusive line of new nutritional supplements developed by Schwarzenegger and MusclePharm's world-renowned scientific team. The Arnold Series product line will initially launch with up to eight supplements supporting the four pillars of fitness: performance, power & strength, nutrient support and recovery. It will be available domestically and internationally at health and nutrition stores as well as online retailers in late September 2013.
  • In July, the Company announced it had earned 17 Bodybuilding.com Supplement Awards nominations. The Awards recognize superior products and brands in the fitness and supplement industry. Nominations are based on sales among the 9,900+ products carried by the site. In the past four years, MusclePharm has won 14 Bodybuilding.com Awards, including 2012 Brand of the Year.

  • In May, the Company named former Office Depot and Arbonne International executive, Richard Estalella, as its Chief Operating Officer. Estalella has over 30 years of proven operations, supply chain, retail, distribution and warehouse experience.

I did visit the company in May 2013 in Denver and I was very impressed with management's track record of hyper growth, and their long term vision.
Buy MusclePharm (MSLP) stock today at 10$ before it soon lists on the Nasdaq stock market. This is a growth company that will soon show profit on the bottom line. It’s the only pure play in the sports nutrition that is listed on the US stock market.
I believe the stock can increase 50% in the next 6- 12 months, based on 1.5 x 2013 revenues of 100mil$
Disclaimer: I do own MusclePharm (MSLP) shares. The above article has been inspired by MSLP’s Sec filings and conference call transcripts. I have not received any compensation for the above report.