Concerns over increased competition and marketing difficulties sink Weight Watchers shares

Markets Associated Press

Shares of Weight Watchers fell in premarket trading Tuesday as it faces tough competition from free and low-cost weight loss applications.

Continue Reading Below

Credit Suisse downgraded its rating on the stock to "Underperform" from "Neutral", partly citing the increased competition and the company's marketing strategy.

"One could choose any number of free weight loss applications or purchase a wearable for a one-time cost and attempt to lose weight without making the financial, physical and time commitment to a program like Weight Watchers," Credit Suisse analyst Glen Santangelo said in the report.

He said the company has faced two years of poor recruitment because of the trend and its marketing strategy may have missed the mark, despite Weight Watchers having one of the best weight loss programs.

The increased competition includes applications like MapMyFitness, which helps people plan, track and analyze their workout. Applications like Myfitnesspal help track calories.

Meanwhile, Santangelo raised concern over the company's capacity for further cost cuts. In February, Weight Watchers provided weaker-than-expected 2015 guidance and said it plans to resize during the first quarter. At the time, CEO James Chambers said the company's execution at the beginning of 2015 wasn't what was hoped for and a turnaround will take longer than anticipated.

Continue Reading Below

Shares of Weight Watchers International Inc. fell 88 cents, or 8.7 percent, to $9.25 in premarket trading about an hour before the market open.