Why Weight Watchers Shares Got Weighed Down

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Weight Watchers International (NYSE: WTW  ) sank 3% today after Credit Suisse downgraded the weight management company from outperform to neutral.

So what: Along with the downgrade, analyst Glen Santangelo lowered his price target to $44 (from $45), representing about 9% worth of upside to yesterday's close. While contrarian investors might be attracted to the stock's steady slide in 2013, Satangelo believes that Weight Watchers' appreciation potential remains limited given all the work management still has to accomplish in order to impress Wall Street.

Now what: Credit Suisse sees a lack of positive catalysts in Weight Watchers' near-term future. "We are increasingly convinced that the current status quo will not be good enough to drive shares higher," noted Credit Suisse. "Despite an attractive FCF yield (~8%), strong brand equity and cost-optimization efforts, the turnaround process will likely be multi-year." With the stock now off 35% from its 52-week highs, and trading at a P/E of 9, however, that short-term sentiment could be providing long-term Fools with an enticing entry point. 

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9/23/2016 4:02 PM
WTW $10.44 Down -0.26 -2.43%
Weight Watchers In… CAPS Rating: **