Why Shares of WW Plummeted 33%

03:20 02/27/2019

WW WTW  (formerly Weight Watchers International) just tipped the scales in the wrong direction.

And it may have cost one of its biggest shareholders – Oprah Winfrey – as much as $48 million. The stock – once up to $103 a share in June 2018 – has since sunk to $20 a share after CEO Mindy Grossman said the company would have fewer members year over year.

In fact, she’s expecting a year over year drop of around 10%. WW also expects to post EPS of between $1.25 and $1.50 a share, as compared with $3.63 expectations.

Revenue of $1.4 billion is also expected, which is $300 million short of estimates. All thanks to a rebranding campaign that fell a bit flat – and left consumers confused.

Branding expert Laura Ries said she was 'stunned and shocked' when Weight Watchers changed its name last year, reported CNBC. “It's never a good idea to switch to initials, 'especially when no one uses the initials.”

However, the company is hoping the Oprah Effect can help turn things around. “Looking ahead, I’m happy to say that Oprah Winfrey will play a central role in our upcoming TV and digital marketing campaign for spring, bringing to life a clear message on how WW is the program that works,” Grossman said. “Together with Oprah, we are also working on an initiative to galvanize and bring together communities through a series of digital and live experiences and events to accelerate WW’s impact and allow us to reach new and diverse audiences.” Technically speaking, we wouldn’t go bottom-fishing just yet.

Since testing $103 in June 2018, the stock has done nothing but sink to lows not seen since April 2017. Should the falling knife fail to catch support at current prices, we could see a potential test of $14 a share. You may want to consider shorting the stock here, or buying the WTW April 18, 2019 20 put at market prices. Things aren’t looking so hot for the stock. And Oprah may not be able to turn it around.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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