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Bear of the Day: Weight Watchers (WW)

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Shares of Weight Watchers International, Inc. (WW - Free Report) have tumbled over 50% in 2019, driven by lowered 2019 earnings and sales guidance. Despite the massive selloff, it appears that Weight Watchers could be headed for a continued downturn even as it tries everything it can to excite investors heading into Q1 earnings, including its new stock ticker.

Overview & Recent News

Weight Watchers officially began trading under its WW ticker on April 22. The company decided to move on from its old WTW in an effort to help it stand out as a more complete wellness firm and not just a weight loss platform. The New York-based company’s stock had soared back in recent years on the back of Oprah Winfrey-based momentum and strong membership growth.

The rebranded company has boasted about its WW line of kitchen tools and products, its meal-prep kits, which hope to compete against Blue Apron (APRN - Free Report) , and other newer initiatives. Yet, Wall Street and investors have seemed to care little about the company’s plans to expand and diversify. In fact, the massive 12-month drop-off has prompted Weight Watchers to roll out a new advertisement campaign that features Winfrey and aims to highlight the company’s WW app and more.

As we mentioned at the top, Weight Watchers last quarter lowered its fiscal 2019 revenue guidance to only $1.4 billion, down from consensus expectations of over $1.65 billion. Worse still, the company’s updated full-year earnings guidance dropped over 60% below projections to between $1.25 and $1.50 a share. Weight Watchers has seen its revenue and earnings fluctuate before and it is coming off a strong 2018, which makes current-year comparisons more difficult. Nonetheless, the 2019 outlook could see things get even worse for the firm.

Shares of WW have tumbled 74% over the last year and roughly 52% in 2019. Jumping back even further, we can see that Weight Watchers stock has been a bit of a roller coaster over the last 15 years.

 

 

Outlook & Earnings Trends

Moving on, Weight Watchers is scheduled to report its first quarter 2019 financial results after market close on Thursday, May 2. With this in mind, our current Zacks Consensus Estimate calls for the company’s Q1 revenue to sink 12.4% from the year-prior quarter to reach $357.73 million. Plus, the company’s current full-year revenue is projected to fall 8.6% to $1.38 billion. And fiscal 2020’s revenues are projected to pop slight above our 2019 estimate but still come in well below 2018’s $1.51 billion.

Things appear even worse for WW at the bottom end of the income statement. The company’s adjusted Q1 earnings are projected to tumble over 187% to a loss of $0.27 per share. Meanwhile, Weight Watchers’ fiscal 2019 EPS figure is expected to decline by nearly 60%.

Once again, WW’s 2020 earnings are projected to come in well below the firm’s impressive 2018 results. Along with its projected Q1 and full-year 2019 EPS declines, we can see just how much its earnings outlook has tumbled in the last 90 days.

 

 

Bottom Line

Weight Watchers’ negative earnings estimate revision activity helps it earn a Zacks Rank #5 (Strong Sell) at the moment. Investors hoping to buy WW on the massive dip might want to wait to see how Wall Street reacts to its upcoming earnings report. And, in the end, WW’s ability to transform into a wellness brand could be hard with so many free dieting apps and platforms out there, coupled with the relative affordability of fitness trackers such as Fitbit (FIT - Free Report) .

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