Calls of Note Part 2

- Citigroup notes that despite modestly negative data points, they still like NutriSystem's (NASDAQ:NTRI) stock over the next year. These negative data points could lead to near-term volatility: 1) website traffic showed moderating (albeit decent) growth; 2) firm believes the retail test w/ GNC is performing under plan; and 3) there is increased competition and copycat programs (particularly regarding the men's plan). While they see near-term volatility, checks indicate that men's program is doing well and though it is still in the early stages, NTRI's senior program is gaining some momentum. In 1Q07 as well as the full year '07, Citi expects 10-20% new customer growth. They would also expect a 15-25% increase in CAC, as they think marketing rose at a greater rate due to increased marketing spent on men and seniors in addition to the core women's business. Firm thinks sell-side analyst estimates may be at the upper end of what the company can achieve (at 36% revenue growth for '07), but investors are not expecting much (19x '07 consensus EPS and 30% short interest) despite 30% long-term EPS growth.

Maintains Buy but lowers tgt to $95 from $105.

Notablecalls: Not actionable but good to know category.