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Why Is Weight Watchers (WTW) Stock Up After Earnings?

It is official, the “Oprah bump” has returned! Back in the day, if you wanted your book or movie to take off, you’d go do a 15 minute segment with the Queen of Daytime TV. Things change though, and today Oprah can help your struggling health and wellness company get back on its feet.

Alright fine, this was probably a one-time thing, but after Weight Watchers WTW reported its first-quarter earnings and adjusted 2016 guidance Wednesday, it’s now hard to deny the effect that Oprah has had since buying a 10% stake in the company in October.

Weight Watchers posted a first-quarter loss of 17 cents, which beat the Zacks Consensus Estimate by a penny. Revenues slipped, coming in at $307 million versus an estimate of $312 million, but nevertheless, the stock soared in after-hours trading thanks to positive subscriber growth and confident guidance.

After the closing bell Wednesday, shares of WTW soared over 15% as the company reported a 5% increase in global subscribers, including 11% subscriber growth in North America. Weight Watchers also increased its EPS guidance to a range of $0.80 to $1.05 versus an 86 cent consensus.

While the stock was able to ride that momentum into early morning trading Thursday, the gains have proved difficult to maintain. Despite remaining up nearly 5%, WTW has lost about 10% from its opening price.

In short, the company’s improved earnings and subscriber growth are good signs. The market also tends to respond positively to guidance improvements, and it is certainly good news that Weight Watchers feels confident about the rest of the year.

Regardless of these improvements or any endorsement from Oprah, the company is still deep in the red. Also, consider that many people are looking to lose weight at the beginning of the year, which could be the main reason for the subscriber growth.

Oprah has had an undeniable effect on Weight Watchers, but whether or not that effect can be maintained in the long run remains to be seen.

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