How Twitter Anticipated Weight Watchers' Latest Surge

| About: Weight Watchers (WTW)

Summary

An Oprah commercial for Weight Watchers drove the stock up 20% in one day.

There's now a strong, established relationship between Oprah and Weight Watchers' stock price.

Social data identified the most recent Oprah/Weight Watchers activity well ahead of the market, and could be used to monitor future developments.

On Monday evening, during an episode of The Bachelor, a Weight Watchers (NYSE:WTW) commercial aired, with new WTW owner Oprah Winfrey talking about her success with the WTW diet, which still allows her to eat bread. The next day, WTW's stock went up 20%, a direct result of that high-profile endorsement. But there was a crucial lag time between the Oprah commercial and the market's reaction, offering investors who use social data a tremendous opportunity.

The commercial was actually first aired in a limited fashion over the weekend, but it was the airing during The Bachelor on Monday night that really caught everyone's attention.

Immediately, viewers started tweeting about it, causing a massive spike in tweet volume for the tags Oprah + Weight Watchers and Oprah + bread, as reported by TickerTags:

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That big spike on the left side of the graph, at approximately 8:30 PM EST, shows that immediate reaction to the commercial. But the news media didn't pick up the story until the middle of the following day - during trading hours. The media was tipped off by a tweet from Oprah at 12:09 PM EST (9:09 PST, hence the timestamp on the tweet):

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WTW's stock started climbing - noticeably but modestly - within minutes of that tweet. Then, at 12:34 PM, Bloomberg published an article about it, and other news sites followed suit. Here's a TickerTags chart showing the volume of articles with the tags Oprah + Weight Watchers and Oprah + bread. Notice how there's no volume on Monday evening (when Twitter spiked), but tons of volume after the Oprah tweet on Tuesday afternoon:

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At 12:05, prior to the Oprah tweet, WTW's stock sat at $11.42. By 12:30, before the Bloomberg article, it was at just $11.82. Over the next hour, it climbed over $13.00. An investor monitoring social data had a massive head start on the market and could have initiated a position hours in advance of WTW's big move.

We've now established that there's a significant and meaningful relationship between Oprah's actions and statements about weight and diet, and WTW's stock. We saw a similar phenomenon in December, when Oprah did a commercial and tweeted about Weight Watchers and the stock shot up 16% in one day. This story could evolve in one of two ways: either there could be additional positive news about Oprah's experience with the WTW diet (such as another tweet or commercial), or there could be negative news (for example, if a gossip article or photo circulates showing an Oprah weight gain). However, the next development in this story breaks, it's likely to show up first in the social data, with the market continuing to lag behind.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.