The Oprah Effect Strikes Weight Watches
Weight Watchers International Inc. reported earnings this week. Revenue in the quarter increased 20% year over year, they raised full-year earnings guidance to between $3.10 and $3.25 a share, from $3 and $3.20 a share previously and subscribers increased 28% year over year for the second quarter. However, the stock sold off 13% after the company also reported that they lost 100,000 subscribers from the first quarter’s 4.6 million subscribers.
Nevertheless, due to the Oprah Effect, the stock price of Weight Watchers is up a staggering 1000% since Oprah took a stake 10% in the company some years back, became a board member and become the face of the program, and appear in ads and commercials.
The Oprah Effect refers to the boost in sales that followed an endorsement on The Oprah Winfrey Show back in days, which turned products into multimillion-dollar companies. Oprah chose products that she liked and could relate to and she supported small mom and pop businesses. In addition, any book she mentioned within her Oprah Book Club instantly became best sellers. And her Effect transcends beyond product. Psychologist Dr. Phil and TV cook Rachael Ray have all become household names with their own TV shows, thanks to the Oprah Effect.
Although Oprah has this Halo Effect, credit must go to Weight Watches for executing as well. The modernized the 50 year old system and transferred it into a digital platform. They made the program more engaging by adding online meetings and support. The updated and expanded the SmartPoints system by adding 200 different foods that encouraged members to eat healthier. As a result, members have been staying longer (on avg. nine months) with the program.
It appears Weight Watches is hitting on all cylinders and has more room to grow, but lets go to the charts to see if the fundamentals line up with the technical.
Monthly Chart (Curve Timeframe) – after reaching all-time highs back in June, price is pulling back with the nearest monthly demand level sitting at $62.
Weekly Chart (Trend Timeframe) – price is technically still in an uptrend, but formed two weekly supply zones at $103 and $95. The nearest weekly demand zone is at $62, which is nestled within the monthly demand zone.
Daily Chart (Entry) – the chart suggest there is more downside risk to the monthly and weekly demand zone. However, there are unfilled buy orders at the $68 level as denoted by the strong move away in white. The chart suggest if you believe there is more room to the upside, this would be a good opportunity to get in, to go long.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Published on
by rollandthomas
I bought it last fall in the 30s and unloaded in the 60s when I thought it was getting too crowded. Now with the pullback, I’m thinking of entering again though it still feels crowded...
Great trade, I remember when Oprah bought in, but never paid the stock any attention until recent news.
My thesis was both the NYE dieters compounded by Oprah effect, esp now that she’s more removed from O network and more involved in her other ventures. New CEO seems great too but didn’t foresee the stock would be getting this much hype. It was overbought and might still be. Now I’m eyeing NFLX and EL on the pull backs.
What's your viewpoint on FB, do you think it's going to close the gap from the sell off 2 wks ago?
I got out of it two months ago before the big dip after 2+ year holding. Sentiment following Russian scandal is high, and now they have to spend more on monitoring. I’ve learned from CMG and SEAS in the past that investors are too quick to jump back in after a crisis. Companies don’t fix the problem that fast. You can tell I’m not a swing trader and isn’t a technical expert.
Whatever you are, sounds like you are doing well and have a great feel for the markets.
No I have plenty of wrong ideas or ones that go nowhere
At the end of the day, it's all about probability, which makes this game so much fun and only the strong, mentally will survive.
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