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Stock Showdown: Weight Watchers vs. Nutrisystem

Expect recent trends to continue for these companies

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With Weight Watchers International (WTW) and Nutrisystem (NTRI) being close competitors in the same industry, you might think the two would dole out a fairly comparable performance for investors.

You’d be wrong, though … at least if you’re talking about recent results. Nutrisystem shares are up 66% since mid-April, while Weight Watchers shares are off 30% since mid-February (most of which was driven by Friday’s 19% plunge).

What’s the deal — and more importantly, what’s next?


What’s the prod for a one-day, 19% plunge from a stock? For Weight Watchers, it was drastically lower guidance for the remainder of the year. Although Q2’s operating profit of $1.39 topped estimates of $1.11, the company lowered 2013’s previous profit estimates by about 4%.

It’s a minor contraction in the outlook, in terms of percentage. But, the market didn’t like the colors the media used to paint the alarming picture; big holes in Weight Watchers’ game plan were exposed. One of the biggest holes was a lack of competitiveness on the web-based front. Although WTW provides online weight-management tools for its members, similar apps are available for free.

The net result of losing ground because of free web-based tools is fading paid memberships … and therefore deteriorating revenue. The total number of members who attend meetings are projected to fall somewhere around 15% in 2013, on the heels of 2012’s 10% drop in meeting attendance. Online-only members are expected to slump by just a single-digit percentage this year, but after last year’s 10% improvement in online membership, that’s an alarming swing that, given the growing amount of competition from similar but free apps, could turn into a nasty trend.

Throw in the fact that Weight Watchers’ debt of $2.4 billion is now a tad greater than the company’s market cap of $2.1 billion, and it’s tough to imagine how it’s ever going to dig itself out of a very deep hole.

To the Moon!

While Weight Watchers has been getting drubbed, Nutrisystem has been on a roll. The stock is up 66% in just the past few months, with the latest leg of the rally inspired by (and this must be maddening for WTW and its investors) raised guidance for the rest of the year. NTRI expects to earn about 10% more in 2013 than it had previously forecast.

Article printed from InvestorPlace Media,

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