KeyBanc: Weight Watchers Set For 20% Subscription, EBIT Growth

The Weight Watchers International, Inc. WTW turnaround is continuing as planned, and the weight loss franchise has a "reasonable" path to $2 billion in revenue by 2020, according to KeyBanc Capital Markets. 

The Rating

Analyst Edward Yruma initiated coverage of Weight Watchers with an Overweight rating and $115 price target.

The Thesis

Updated brand messaging, effective programming and an emphasis on digital should drive 20-percent growth in subscriptions and earnings before interest and taxes, Yruma said in a Monday note. (See the analyst's track record here.) 

“We think the targeting of new customer cohorts, innovative marketing and the intrinsic attractiveness of the Freestyle program broaden Weight Watchers’ customer base,” the analyst said. 

At the same time, both member spend and retention are improving, and KeyBanc anticipates an increase in the average length of stay.

“Weight Watchers is well-positioned to capitalize on health and wellness secular trends,” Yruma said. “With over 40 percent of the U.S. obese, we believe that Weight Watchers’ scientific and community-based approach differentiates it from strictly a ‘diet’ plan.”

The longevity and expertise of Weight Watchers' scientific advisory board are seen to further distinguish the company's model and appeal to new members, Yruma said. 

Price Action

At the time of publication, Weight Watchers shares were trading down more than 1 percent at $96.75. 

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