Weight Watchers Shareholders: Buy Oprah, Sell Kate Hudson

Shares of WW, formerly Weight Watchers WTW, are poised for a strong Monday after a rough month and a half. Shares have fallen more than 30 percent after WW announced disappointing third-quarter EPS and revenue results.

What Happened

Kate Hudson was announced as “Global Ambassador” for the brand Sunday night in a multi-year agreement. In this capacity, Hudson is set to describe her life in wellness and encourage others to share their health goals for 2019 as a part of WW’s “For Every Body” campaign.

Ads featuring Hudson are expected to go live on December 26th.

In the press release announcing the partnership, Hudson said, "The aspect I love most about WW is the community because I know that community is so essential to wellness,” giving a nod to her role in promoting WW’s community groups.

Oprah Winfrey, a member of the WW board, was also featured in the press release.

Why It Matters (Hint: Oprah Winfrey)

105 percent is the biggest one day jump in WW share prices, according to Finscreener, which allows users to filter stocks for their biggest gaining and losing sessions. This move happened after Oprah Winfrey was announced to the board of directors and purchased newly issued shares representing 10 percent of the company on October 19th, 2015.

Data courtesy of Finscreener.

After the 105 percent one-day move, shares of WW continued to make significant moves the next day and 14 sessions after the Oprah news was announced on November 6th.

Chart courtesy of Finscreener

What’s Next - Bull Case

Several weeks following Oprah’s partnership announcement, shares moved 14 percent higher after she tweeted a 60-second video commercial for the company. Hudson’s campaign is set to go live in the week between Christmas and New Year.

Shortly after the 2015 announcement, Craig-Hallum reiterated its Outperform rating and raised its price target on the stock from $10 to $20, Barclays upgraded the stock from underweight to equal-weight and raised its price target from $5 to $14.

Currently, eight analysts rate WW a strong buy, while two rate the stock a hold, according to Finscreener. Analyst rating and price target changes may be an additional catalyst for WW share movement.

Data courtesy of Finscreener.

What’s Next - Bear Case

Oprah may be losing interest in WW according to a New York Post article published Thursday night despite her agreement with the company lasting through 2020. Shares fell 3.97 percent Friday.

According to the report, Oprah has been significantly less present than usual in WW marketing and spent more time on other businesses, including her own healthy eating brand. On March 7th, 2018, Oprah sold 2.36 million shares of WW, but stated, “I am deeply committed to Weight Watchers and continue to see a bright future for the company.”

Some are speculating Hudson may be stepping in to serve as a replacement for Winfrey. An announcement that Winfrey will no longer be involved in the company would almost certainly hurt the stock.

The press release announcing Hudson’s involvement says she will appear alongside Oprah in future marketing campaigns.

Shares of WTW are trading down 0.5 percent as of late Monday morning.

Finscreener is a content partner of Benzinga

Photo credit: Greg Hernandez (Oprah Winfrey at 2011 TCA) [CC BY 2.0]