Investors should shed Nutrisystem, Weight Watchers
Dieters are discovering they can lose weight for free using apps.
The hardest thing for any company is to compete against a rival who gives away a product for free. Microsoft (MSFT) has faced this problem for years with the Linux operating system, while Apple (AAPL) is fending off a challenge from Google's (GOOG) Android mobile operating system. Both Linux and Android are open-source platforms available for free. Linux's rising popularity is helping push the market share of Microsoft's Windows platform below 90%. Android's market share was 46.3% in the fourth quarter, versus 30% for Apple's iOS, according to Nielsen.
For the weight-loss business, the challenges are similar. The diet industry has to convince heavy people like me that their products and services will enable us to defy the odds and lose weight and keep it off. It's a tough sell given that research has found that "80% of people who have lost weight regain all of it, or more, after two years," according to Women's Health.
Given those daunting odds, why should I put money into a diet program? Many investors and dieters seem to feel the same way.
Nutrisystem, which Monday reported disappointing earnings, is not cheap. The company is running a special offer, which includes its pre-packaged foods, for $195.44 a month. Weight Watchers, which issued disappointing earnings and guidance last year, is less expensive. The company is advertising a three-month savings plan for $56.85 with monthly charges of $18.95 thereafter. Doctors I consulted seemed to prefer Weight Watchers and the South Beach diet over Nutrisystem.
Losing weight is not rocket science, as I have discovered, though I remain concerned about regaining the pounds that I have lost. I eat right and exercise regularly. My wife makes sure that I keep going to the gym. Lose It keeps me honest by making me aware of the impact of the foods that I consume on my overall well-being. I don't see any reason to change something that clearly is working to my benefit.
Nutrisystem and Weight Watchers face an uphill battle to convince the public that their services are worth the money. As apps become more popular, that challenge will get even more difficult. These shares should be avoided.
Jonathan Berr is nowhere near his goal weight. He owns no shares listed here.
WTW is a horrible investment. After this stock buyback is done they will have around $2.5B in debt on the books. Earnings growth at 12% a year, and they haven't even factored in the enourmous debt/interest payment per quarter yet. WTW is one of the worst investments in this market.
Then on the actual products usefulness, WTW is really a scam, to lose weight all you have to do is maintain the caloric intake of what you want to weigh. You can figure out what that is and your body will go to that weight. Just make sure to do a full body workout and sleep right. WTW might give motivation, but really, as gas continues to go up, groceries go up, and other costs rise (thanks Ben), how many people will have extra money to spend on WTW when they can do it for free.
To use the analogy of the writer, if someone gave you an Android for free that made free calls/3G/4G, why would you ever buy an iPhone on a monthly plan? People who would choose the iphone in this senerio would also choose to buy WTW.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.