Why WW International Finished Down 1% in 2019 – The Motley Fool


Posted: January 15, 2020 at 8:47 pm

What happened

In a roller-coaster year, shares ofWW International Inc (NASDAQ:WW), the company formerly known as Weight Watchers, fell sharply through the first few months of the year on worsening subscriber growth, but then recovered those losses. By the end of 2019, the wellness stockwas down just 1%, according to data from S&P Global Market Intelligence. However, that was much worse than theS&P 500, which gained 29% on the year.

The chart below shows how both investments played out over the course over the year.

WW data by YCharts

WW came into the year on a downward trend as its rebrand from Weight Watchers to WW, with an emphasis on wellness rather than weight, did not seem to have the desired impact, and confused both Wall Street and prospective customers. In January, the stock fell, partly due to a downgrade fromJPMorgan Chase, whose research found that the weight-loss specialist got a weak start to the year, the peak season in the industry.

Image source: Getty Images.

Those fears were confirmed when the company posted disappointing results in its fourth-quarter report at the end of February, sending the stock down 34.5% as subscriber growth slowed for the third quarter in a row, though it was still up from the year before. Revenue was also much worse than expected, and management acknowledged a "soft start" to the year, saying that 2019 recruitment would be below the year before.

From there, the stock hovered around $20 for the next several months and finally began to make the move back up in WW's second-quarter earnings report. Though the report was ugly,with declines in revenue and profits, shares surged 43% as management raised its full-year earnings per share (EPS) guidance to $1.55-$1.70 from $1.35 to $1.55, indicating the subscriber decline may have hit a bottom.

Though the stock fell after WW's third-quarter report, it surged through the end of the year as Oprah Winfrey, who is a major investor in the company and board member, said she would do a promotional tour.

The stock has continued to gain in the new year, up 19% so far on general bullishness about the brand's recovery, as there was little company-specific news out. Considering the wellness stock's volatility over the last few years and the uncertainty of its subscriber growth trends, WW remains a high-risk play.

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Why WW International Finished Down 1% in 2019 - The Motley Fool

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