After Jumping 70% Since Late March, Has Weight Watchers’ Stock Run Out Of Steam?

Weight Watchers stock (NASDAQ: WW) has rallied nearly 70% over recent weeks (vs. about 39% gain in the S&P 500) to its current level of around $25 after falling to a low of $15 in late March as a rapid increase in the number Covid-19 cases outside China resulted in heightened fears of an imminent global economic downturn. While the stock remains 32% below the $38 peak it reached in mid-February, we believe it has little room for growth over the coming months. Our conclusion is based on our detailed comparison of Weight Watchers’ stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

How Did Weight Watchers Stock Fare During The 2008 Downturn And What Does It Mean For The Stock This Time Around?

We see Weight Watchers stock declined from levels of around $51 in October 2007 (the pre-crisis peak) to roughly $17 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 68% of its value from its approximate pre-crisis peak. This marked a steeper drop than the broader S&P, which fell by about 51%.

However, Weight Watchers recovered strongly post the 2008 crisis to about $27 in early 2010 – rising by 66% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

In comparison, Weight Watchers stock lost 61% of its value between the market peak on February 19 to the low on March 23 and has already recovered nearly 70% since then. Keeping in mind the trajectory over 2009-10, this suggests a potential recovery to around $27 once economic conditions begin to show signs of improving. This marks a partial recovery to the $38 level WW stock was at before the coronavirus outbreak gained global momentum.

The rally across industries over recent weeks can primarily be attributed to the Fed stimulus, which put investor concerns about the near-term survival of companies to rest. The gradual lifting of lockdowns globally has also helped the demand for some non-essential goods recover. Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new COVID-19 cases in the U.S. to buoy market expectations. While Q2 results will be weak, investors will focus their attention on 2021 results – helping Weight Watchers stock trend higher over the latter half of the year.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. Additionally, the complete set of coronavirus impact and timing analyses is available here.

While Weight Watchers’ stock is recovering strongly, companies in several sectors are fighting for survival. Our dashboard Impact Of The COVID-19 Recession On Abercrombie and Fitch analyses the impact of the recession on the apparel company’s cash reserves.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams