WW International Inc., (Ticker Symbol: WW) formerly known as Weight Watchers International Inc., released earnings that were better than expected while raising its estimates for its profits in 2019. The health and wellness company reported an earnings per share beat of 78. cents per share vs. Wall Street analysts’ expectations of .64 cents per share.
However, Weight Watchers released a revenue miss reporting $369 million in revenues vs. Wall Street analysts’ expectations of $376.1 million. The company reported a net income of $53.8 million for the quarter which was down 24% from this period one year ago. Weight Watchers reported a net sales decline of nearly 10% for the quarter reporting sales of $369 million vs. Wall Street analysts’ expectations of $376.1 million.
Above is a two-and-a-half year chart of Weight Watchers’ stock. The stock began 2017 on a strong note lead by positive earnings releases in the first three quarters, which gave the stock some momentum. Weight Watchers then spent the next four months in a trading range between the $40.00 and $50.00 price levels, eventually finding some price support at its 100-day Simple Moving Average. Weight Watchers’ stock spent all four quarters of 2018 forming a head and shoulders topping formation. Traders and investors sometimes look at head and shoulder patterns for a possible pause within the current trend, which can, at times, lead to a reversal as occurred in Weight Watchers’ case.
Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Weight Watchers’ case, one would take the top price from the head of the pattern (roughly $105) and the price of the neckline from the pattern (roughly $60) then subtract them to get the difference ($45). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline – Difference = Measured Move). In Weight Watchers’ case, the projected price target from the head and shoulders pattern was roughly $15.00. Although it came close to that target in the second and third quarters of this year, it has yet to achieve its target so far. Currently, the stock is trading above both its 100- and 200-day simple moving averages.
(Chart above courtesy of www.tipranks.com)
Based on a survey of eight analysts offering 12-month price targets, the average price target for Weight Watchers stock is $30.43. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $35.40.
Oprah Winfrey took a large stake in Weight Watchers stock in October of 2015 where she purchased 6.4 million shares at an average price of $6.79 per share, which is worth a total of $43.6 million. The stock appreciated nearly 200% after her purchase but has since come down to more reasonable valuations.
Investors in the company should look to their next earnings release on November 3rd for fresh news within the company.