Weight Watchers surges after JPMorgan upgrades its stock, citing subscriber growth
- Weight Watchers was upgraded to a "netural" rating from "underweight" by analysts at JPMorgan. They also raised the price target to $22 from $17.
- The stock gained as much as 10% on the news.
- The company has struggled to boost investor confidence after plummeting 35% in a single day earlier this year on a weak earnings release.
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Weight Watchers is gaining - but it's a good thing.
Shares of Weight Watchers jumped as much as 10% Thursday after analysts at JPMorgan upgraded the rating on the stock to "neutral" from "underweight," while also raising their price target to $22 from $17.
"We believe that subscriber trends have stabilized, which is supportive of the company's ability to reach 2019 guidance," a team of JPMorgan analysts led by Christina Brathwaite wrote in a note to clients.
The stabilization of subscriber trends the company has seen in the first half of the year should pave the way for improvement in the second half, the analysts said. There's also potential growth opportunity in 2020 after the company launches a new diet program, which it has said will likely be personalized and based on the latest food science.
JPMorgan expects that the new program will further boost subscriptions and earnings growth.
Increased competition in the space is the downside that the analysts see, as new companies such as Noom gain speed. In May, Noom raised an additional $58 million of funding, which it intends to use for marketing.
In addition, there are a full range of free app alternatives that are sapping market share from Weight Watchers.
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The boost comes at a time when Weight Watchers has struggled to gain investor confidence. The company plummeted 35% in a single day back in February when it reported earnings that disappointed analyst expectations. Declining subscriber numbers were the culprit, erasing huge gains seen in the stock after it signed partnerships with Oprah Winfrey and DJ Khaled.
Winfrey, long a supporter of the company and its main spokesperson, avoided a loss of about $40 million by selling 1 million shares in 2018. She still holds Weight Watchers stock, but is no longer the owner of about 10% of the company.
Weight Watchers got a bump at the start of the year, when it reported a smaller-than-expected loss in its first quarter earnings in May.
Shares of Weight Watchers are down 40% year to date.