It’ll take a lot more than Oprah Winfrey to bring Weight Watchers back to life.
Just days after the Oprah Effect doubled the stock, we’re beginning to see signs of heavy selling pressure at the top. That’s because once news – as great as this – has been fully disseminated, we begin to see a sell-the-news reaction.
It’s why the overbought stock dropped more than $2.80 on Wednesday.
Unfortunately, the stock needs more than Oprah to stay afloat, heavily burdened with debt and losing its customer base. The company has $149.72 million in cash on hand with $2.24 billion in debt.
Its net leverage ratio, according to Crain’s, has doubled over the last five years to 6.4. Even with one of the most trusted, popular celebrities on board, that debt crisis won’t be solved soon. We must also consider how much the weight loss landscape has changed with competitors offering apps and fitness trackers.
Bottom line…There are better ways to trade the weight loss story than by hopping on the Oprah Effect bandwagon. WTW could easily slip back under $7 as the story fizzles out.