Please ensure Javascript is enabled for purposes of website accessibility

How Risky Is Weight Watchers Stock?

By Rick Munarriz - Apr 8, 2016 at 11:13AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Oprah Winfrey has put the weight management plan provider on the map, but there's a long way to drop if she doesn't succeed as a marketer.

Image source: Weight Watchers.   

There aren't too many stocks that have been experiencing the kind of wild price swings that we've seen with Weight Watchers (WW 3.24%) in recent months. The provider of weight management solutions has been a bucking bronco since Oprah Winfrey took a significant stake in the company and became an active promoter. 

Even on a weekly basis the market's seeing some ridiculous fluctuations. The stock has delivered double-digit percentage moves in 11 of the past 16 weeks. That's going to make ownership a challenge for anyone not stocked up on Dramamine. The one-year beta for Weight Watchers stands at a chunky 3.39, according to S&P Global Market Intelligence data.

It was a white-knuckled thrill ride last year, too. It traded as low as $3.67 last summer when it seemed as if calorie counters had moved on from Weight Watchers. It had kicked off 2015 with just 2.5 million active subscribers, 15% fewer than it had a year earlier, and the new year wasn't showing any signs of a turnaround.

Then the turnaround started. Weight Watchers boosted its guidance in early August, but the real fireworks started in October when Oprah Winfrey revealed that she would be taking a 10% stake in Weight Watchers. It wasn't going to be a passive investment. She would be taking an active role in promoting the diet plan specialist, a match made in heaven given her well-publicized ups and downs in managing her own weight. She also took a seat at the board of directors. Her stake ultimately grew to a 15% position. 

The stock went on to peak north of $28 in November, but it has gone on to shed nearly half of its value. Winfrey's impact didn't result in an immediate uptick in signups. In fact, Weight Watchers closed out the holiday quarter with less than 2.4 million active subscribers, accompanied by a double-digit percentage year-over-year decline in revenue.

If this seems more like a recent review of corporate events than an assessment of the risk in ownership, it's because they are both the same thing. The biggest opportunity is "the Oprah effect" but Winfrey is also the biggest threat. She can move on. She can become enamored with another weight management solution and either unload her position or decide to take the backseat in promoting the brand.

Her influence is undeniable, even if it didn't result in a surge in subscriptions late last year. Winfrey has been a key component of the marketing campaign at Weight Watchers. A regulatory filing revealed that Winfrey's presence helped generate more than a billion earned media impressions.

Winfrey's departure would be a major blow to Weight Watchers, but perhaps the biggest risk is the unlikely scenario where her presence doesn't drum up subscriptions. The next few quarters will be huge. If Winfrey's hard sell doesn't motivate folks to gravitate to Weight Watchers, it won't matter if she's an investor or not.  

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

WW International, Inc. Stock Quote
WW International, Inc.
WW
$7.64 (3.24%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.