Weight Watchers (WTW) Runs Downhill, But this Analyst Thinks Now Is the Time to Buy the Stock


Weight Watchers (NYSE:WTW) honeymoon with Wall Street hit a big bump Tuesday, when the slimming giant reported mixed second-quarter results.

While the company added 1 million new subscribers in 2Q, bringing the total to 4.5 million, it was still fewer than the 4.6 million signed up in the previous quarter. As such, 2Q revenue of $408.4 million fell short of the Street’s forecast of $410.4. To the company’s credit, EPS of $1.01 easily surpassed consensus estimates of $0.88 and was up versus $0.66 (adjusted) last year.

B.Riley FBR analyst Kara Anderson commented, “Weight Watchers reported 2Q results that were highlighted by an expanding audience, strong gross profit leverage, progression towards 2020 goals, and multiple catalysts to keep the momentum going […] End of period subscribers of 4.5 million beat our 4.3 million forecast on up-lift in subscribers that joined with the launch of its summer marketing campaign late in the quarter, many of whom are part of a broader and more diverse audience and completely new to Weight Watchers. The company’s digital offerings helped boost online subscribers which grew 39% Y/Y in 2Q outpacing the more modest but still solid meeting subscriber growth of 11% Y/Y, a testament to the changing demographic in our opinion. Engagement is strong, retention is inching towards 10 months, and the company has member rewards and a more marketing plans for its already well received Invite a Friend promotion later this year in addition to previously articulated initiatives like WW Fresh and reformulated products and packaging.”

“We slightly raise our FY18 adjusted EBITDAS and EPS estimates with our revenue forecasts similarly modified down on the strengthening dollar,” the analyst added.

As such, Anderson reiterates a Buy rating on Weight Watchers shares, while raising the price target from $103 to $113, which represents a potential upside of 41% from where the stock is currently trading. (To watch Anderson’s track record, click here)

How does Anderson’s bullish forecast echo against the word of the Street? Quite positively, it seems, as TipRanks analytics exhibit WTW as a Strong Buy. Based on 8 analysts polled in the last 3 months, 7 rate a Buy on Weight Watchers stock while only 1 maintains a Hold. The 12-month average price target stands at $112.63, marking a nearly 42% upside from where the stock is currently trading.

 

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