Great ResignationInflationSupply ChainsLeadership

Here’s Why Weight Watchers Stock Is Getting Absolutely Hammered

February 25, 2016, 11:04 PM UTC
An Evening With Oprah - Sydney
Oprah Winfrey
Photograph by Mark Metcalfe—Getty Images

Weight Watchers’ shares have been yo-yoing dramatically since October. While the diet company’s users are looking to lose weight, investors are finding themselves digesting a steep loss.

Shares dropped by over 20% after the company reported a surprise fourth-quarter loss and revenue that barely exceeded Wall Street’s expectations. Weight Watchers (WTW) reported revenue of $259.2 million in fourth quarter revenue, tumbling 21% from a year ago, and the adjusted loss for the period totaled three cents a share. Analysts, surveyed by Thomson Reuters, had projected $258 million and a two-cent profit, respectively.

Weight Watchers also projected a steep first-quarter loss as it ramps up marketing to recruit new members. Executive indicated that revenue wouldn’t rebound much for 2016.

The company’s stock has been volatile since media mogul Oprah Winfrey announced she would take a 10% stake in the company in October. The stock moved dramatically several other times since Winfrey’s investment, mostly due to the popular TV personality’s announcements related to the brand. An ad campaign late in 2015 and news of Winfrey’s recent weight loss each moved the stock upward.

But the stock–which climbed to near $27 around the New Year period when Americans are more likely to think about dieting–now sits at around $11.30, or down 27%, in after-hours trading on Wednesday.

Executives told analysts that investors will have to be patient when it comes to revenue growth. An increase in recruitment results in a lag in revenue that Weight Watchers books–so any boost that could come from the company’s new Beyond the Scale program and relationship with Winfrey will take time to hit the top line.

Within the massive $64 billion U.S. weight loss market, pockets of weakness have been pegged to weight loss centers and low calorie/diet foods. That can partly be attributed to the proliferation of smartphone apps, which can help track calories and movement and reduce the need for some consumers to visit a physical center and talk to a coach.

Weight Watchers ended the fourth quarter with 1.53 million active subscribers, down 5.3% from the prior year. The start of the quarter started off weak, partly offset by increased recruitment after the partnership with Winfrey was announced and the company launched a new program.