Image source: Weight Watchers.
One of the trickiest things about dieting is managing the ups and downs of weight loss. It seems as if Weight Watchers (WTW +0.00%) shareholders are going through the same thing. The stock soared 30% after a Securities and Exchange Commission filing revealed how powerful having Oprah Winfrey as a spokesperson and stakeholder can be for the provider of weight management solutions.
The regulatory 10-K filing claimed that Winfrey talking up Weight Watchers provided it with more than 1 billion earned media impressions. That's a lot of "free" advertising, and as soon as Bloomberg picked up on that morsel, other financial outlets began to publicize the meaty milestone.
However, is that really a surprise? We've known about "the Oprah effect" for years. If the media tycoon recommended something on her afternoon talk show or other subsequent media outlets, it would have a strong favorable impact on sales of that product or service. Tie in Winfrey's well-publicized ups and downs with her own dieting challenges and it was a no-brainer that Weight Watchers would benefit greatly from her endorsement. In short, it was a pretty weak catalyst that contributed to shares of Weight Watchers appreciating by nearly a third of its value.
Another thing that isn't a surprise is Weight Watchers stock moving. It's been one of the most volatile stocks since Winfrey disclosed shelling out $43.2 million for a 10% stake and a seat on Weight Watchers' board of directors. She ultimately increased her position to 15%. The stock rarely stands still these days. Let's look at that weekly gains and hits that Weight Watchers has experienced in recent months.
| Week Starting | Close | Change |
|---|---|---|
| 12/7/15 | $24.39 | (7%) |
| 12/14/15 | $20.99 | (14%) |
| 12/21/15 | $18.00 | (14%) |
| 12/28/15 | $22.80 | 27% |
| 1/4/16 | $14.85 | (35%) |
| 1/11/16 | $13.76 | (7%) |
| 1/18/16 | $11.54 | (16%) |
| 1/25/16 | $12.69 | 11% |
| 2/1/16 | $11.10 | (13%) |
| 2/8/16 | $11.05 | (0%) |
| 2/16/16 | $14.92 | 35% |
| 2/22/16 | $11.01 |
(26%) |
| 2/29/16 | $14.27 |
30% |
Take in those nerve-rattling ups and downs. Weight Watchers has experienced double-digit percentage moves in 10 of the past 13 weeks. Outside of one flattish week in early February, we're talking about a move of at least 7% every single week since early December. Perhaps even more problematic for investors hoping that last week's pop will carry over into the new week, the stock's three previous double-digit percentage upticks were followed by declines of 35%, 13%, and 26%, respectively. You actually have to go back to late November to find the last time the stock has posted back-to-back weeks of gains.
Weight Watchers stock has become ridiculously volatile. Its one-year beta is clocking in at a sky-high 3.21, according to S&P Global Market Intelligence data. Most of these weekly moves have happened without a material news event driving the stock one way or the other. Sometimes there will be developments including a weak holiday quarter or a favorable journal study triggering the move, but the stock seems to always be on the move -- even in the absence of game-changing news. The stock should continue to be on a yo-yo, and we may have to wait until Weight Watchers lives up to "the Oprah effect" hike by posting membership growth for a quarter before we get a sustainable rally.
