Weight Watchers International, Inc. (WW) shares soared more than 35% during Wednesday's session after the company posted mixed second quarter financial results and a robust future outlook.
Revenue fell about 10% to $396 million, missing consensus estimates by $7.1 million, but earnings per share (EPS) came in at 78 cents, beating consensus estimates by 13 cents per share. Looking ahead, the company expects full-year revenue that is in line with expectations at $1.4 billion and EPS of between $1.55 and $1.75, which is sharply higher than the consensus estimate of $1.52. Subscriber metrics also ticked up.
Analysts reacted favorably to the quarterly results and outlook. Bank of America Merrill Lynch upgraded Weight Watchers stock by two notches from Underperform to Buy and raised its price target from $25.00 to $27.00 per share. Analyst Olivia Tong notes that subscriber growth has stabilized with a 1.5% increase this quarter, while improving brand quality, new innovations, and marketing support could boost sales and earnings ahead.
From a technical standpoint, the stock broke out from reaction highs in mid-July to nearly reach the 200-day moving average at $30.25 during Wednesday's session. The relative strength index (RSI) rose to overbought levels with a reading of 73.11, but the moving average convergence divergence (MACD) experienced a bullish crossover that could indicate more upside ahead. These indicators suggest that the stock could see a brief period of consolidation before resuming its trend higher.
Traders should watch for some consolidation below the 200-day moving average and above reaction highs of around $27.00 over the coming days. If the stock breaks down, traders should watch for support at the 50-day moving average at $21.07. If the stock breaks out from the 200-day moving average, traders could see a move toward prior highs at around $52.50 over the long term if the recovery continues.
The author holds no position in the stock(s) mentioned except through passively managed index funds.