B Riley Is Bullish On Weight Watchers Ahead Of Q4 Report

Weight Watchers International, Inc. WTW stock has gained more than 450 percent over the past year, partly due to media mogul Oprah Winfrey becoming part owner and the face of the company.

On Tuesday, the company will report its fourth-quarter results, but investors should focus on management's commentary on longer-term goals, according to a Wall Street bull.

The Analyst

B Riley FBR's Kara Anderson maintains a Buy rating on Weight Watchers' stock with an unchanged $86 price target.

The Thesis

Weight Watchers is expected to reveal 15 percent year-over-year growth in revenue to $307.9 million in its Q4 report, Anderson said in a Thursday note. The company should deliver gross margin expansion driven by higher volumes, which will likely result in an acceleration in adjusted EBITDA and EPS growth, she said. 

While Weight Watchers is expected to report an overall "solid" Q4 print, the bulk of investor attention will be on the post-earnings conference call and any commentary related to management's 2020 revenue target of $2 billion-plus, the analyst said. The outlook is likely driven by encouraging performance metrics from the new WW Freestyle program, which the company recently said is seeing an "incredible response."

Weight Watchers' longer-term guidance implies that near-term fiscal 2018 revenue guidance should be delivered ahead of the current consensus estimate of $1.44 billion, Anderson said.

The case for being bullish on Weight Watchers' stock is still based on the belief that a "new visionary leadership can capitalize on growth opportunities from new audiences, markets, partnerships and channels," Anderson said. 

Price Action

Weight Watchers stock was down slightly at $71.68 at the close Thursday. 

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