Analysts Tip The Scales On Weight Watchers After Guidance Sinks Shares

Weight Watchers International, Inc. WTW disappointed investors with a fourth-quarter earnings report that fell short of nearly every expected metric and signals the company struggles to transform itself from a diet brand to a wellness company.

Oppenheimer: Unusual Speed Of Collapse

Weight Watchers' re-branding to WW has resulted in an unusual scenario where the transit business fell "apart that quickly," Oppenheimer's Brian Nagel told CNBC. It's likely management "tripped over their own feet" during its transformation away from just weight loss. The shift in strategy makes sense, but took place over the worst time period as many consumers decide after the December holidays to lose weight as part of a New Year's Resolution.

KeyBanc: No Rebound In 2019

WW's management team presented a game-plan to rebound after a soft start to 2019 but it is unlikely to be sufficient to "turn the tide" in the short to medium-term, KeyBanc Capital Markets' Edward Yruma said in a note. The two most notable strategic priorities management highlighted include improving marketing execution and studio performance.

The analyst downgraded the stock from Overweight to Sector Weight.

Yruma said WW's marketing campaign in fall 2018 and the current winter season has fallen short of expectations and the transformation away from a weight loss company will take more time to generate positive results. The company's other strategic priorities including innovation, personalization and wellness events will likely only show positive results after 2020.

Oprah's Loss

Immediately following WW's fourth-quarter report, board member Oprah Winfrey lost $48 million from her approximate 8-percent stake in the company, CNBC reported. The billionaire media mogul still holds more than 5 million out of an initial 6.4 million share stake, which she accumulated in 2015 below $7 per share.

Elsewhere On The Street

• Bank of America downgrades Weight Watchers from Buy to Underperform.
• B. Riley FBR downgrades Weight Watchers from Buy to Neutral and lowers the price target from $75 to $22.
• SunTrust Robinson Humphrey downgrades Weight Watchers from Buy to Hold.
• Craig-Hallum downgrades Weight Watchers from Buy to Hold.

Price Action

Shares of Weight Watchers traded lower by 35.3 percent to $19.22 Wednesday morning.

Related Links:

3 Reasons For JPMorgan's Weight Watchers Downgrade

Morgan Stanley: The Street Is Overestimating Weight Watchers' Addressable Market

Photo credit: Mike Mozart, Flickr