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Can Weight Watchers Keep Moving After Last Week's 27% Pop?

By Rick Munarriz - Jan 3, 2016 at 8:00AM

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A new Oprah Winfrey commercial promotes the weight-management plan, and that's a pretty big deal.

It's not every day a TV commercial moves a stock higher, but when you're Oprah Winfrey singing the praises of Weight Watchers (WW -13.51%) -- again -- things are different. Shares of the provider of weight-management solutions soared last week after a new commercial spot featured Winfrey passionately promoting the Weight Watchers program.

The ad helped move Weight Watchers stock nearly 27% higher during the holiday-abridged trading week, making it the New York Stock Exchange's second bigger winner. Winfrey didn't stop there. She tweeted her empowering pitch to her more than 30 million followers. 

Winfrey's push isn't a surprise. The stock more than doubled back in October when it was disclosed that that she was investing $43.2 million for a 10% stake in Weight Watchers and a seat on its board of directors. Her stake eventually ballooned up to 15%. Winfrey's ups and downs with weight management has been media fodder for years, and her vocal and financial endorsement could be seen as a self-fulfilling prophecy.

Source: Weight Watchers.   

Weight Watchers was a mess before Winfrey's arrival. It had its CEO step down in 2013 amid a sea of cascading forecasts. By the end of 2013 the stock had suspended its dividend with the shares closing out the year 36% lower. The stock would go on to lose another 25% of its value in 2014, and then things got even worse in early 2015. It announced that it suffered a sharp decline in subscribers during the 2014 holiday quarter, resulting in the stock taking a double-digit percentage hit in four of the five subsequent weeks. 

By the time the stock hit rock bottom -- trading as low as $3.67 in July -- it was trading at 85% lower, year to date. It was that brutal.

Things started to bounce back a month later, soaring 54% in August after boosting its outlook for the year. That only made a small dent in its year-to-date plunge, but it paved the way for an even bigger pop in October when Winfrey took a personal and financial interest in Weight Watchers. 

The stock may have gone on to soar 521% since bottoming out this past summer, but the cruel truth is that Weight Watchers stock actually closed lower for all of 2015. This is actually a good place to be for investors. A decline warranted. Net revenue has declined 21% through the first nine months of 2015. However, Winfrey is now actively promoting Weight Watchers. She may have financial motivations for doing exactly that, but tens of millions of people follow her. They trust her. If it continues to net physical results for Winfrey it's a safe bet that Weight Watchers will have a big turnaround in 2016. The good times will continue.

 

Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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