Weight Watchers a 'Buy' Before Diet Season, Says Analyst

The price target of $137 represents expected WTW upside of about 170%

Deputy Editor
Dec 11, 2018 at 11:28 AM
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News that Tivity Health (TVTY) bought NutriSystem (NTRI) helped Weight Watchers International, Inc. (NASDAQ:WTW) stock snap a three-day losing streak yesterday. What's more, an analyst at DA Davidson said that based on the same valuation metrics of the NTRI deal, WTW stock is undervalued by 15% to 36%. Further, the analyst reiterated a "buy" endorsement and $137 price target, saying a "successful diet season outcome" could lift the shares when Weight Watchers reports earnings in February.

At last check, WTW shares were up 1.6% to trade at $49.94. The stock has been trading in a series of lower highs and lows since its record peak of $105.72 in mid-June. Its deep decline, facilitated by two dramatic bear gaps, has slashed the equity in half since then. More recently, the stock has been trading in the $45-$55 range since the November bear gap, attempting to stay north of its year-to-date breakeven marker at $44.28. 

Despite the equity's struggles in the second half of 2018, most analysts are already optimistic toward WTW. Eight of 10 analysts issue a "strong buy" rating, with not a single "sell" in sight. Weight Watchers stock has a ways to go before it hits analysts' consensus 12-month price target of $91.92, which stands at nearly an 85% premium to current levels. 

However, near-term options traders have taken a much more pessimistic stance lately. WTW's Schaeffer's put/call open interest ratio (SOIR) of 4.04 sits in the high 87th percentile of its annual range, showing put open interest quadruples call open interest among options expiring in the next three months. The lofty percentile suggests short-term traders have rarely been this put-heavy on Weight Watchers during the past 12 months.

 

 


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