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By Jason Stipp and Jeremy Glaser | 10-23-2015 09:00 AM

Our Take on Big Movers Valeant and Weight Watchers

Plus, GM hits its stride, Amazon finds a path to profitability, and McDonald's shows some nimbleness.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five, Morningstar's take on five stories in the market this week.

Joining me with The Friday Five is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: You're welcome, Jason.

Stipp: A big news week in the market. Let's start with Weight Watchers. Oprah is now partnering with the firm. That gave the shares a big boost, but our analyst is not quite so optimistic.

Glaser: This week could easily have been The Friday 15 or The Friday 20, given the amount of news that came in.

One of the big stories was Oprah's 10% stake in Weight Watchers. She will be taking a seat on the board, and she's also going to help with the marketing. The stock doubled on this news, so it obviously was a big win.

We think that this is undeniably positive for the company; we doubled our fair value estimate, and increased a lot of our estimates of what Weight Watchers can do. But there are some things that investors do need to keep in mind. Weight Watchers is under a lot of pressure from free calorie-counting apps and from fitness trackers that have apps--different new competitive sources that are holding down their pricing power and making it difficult for them to pass along price increases and to recruit new members. That's a challenge for them that's not going to go away just because Oprah is onboard. And while Oprah will resonate probably quite a bit with Weight Watchers' core customer, it's not clear if she's going to bring in a lot of new, maybe younger members who would also help bring recruitment goals back.

There are some other positive things going on at the company. They have a business-to-business segment that partners with insurers and employers to try to help employees reach weight-loss goals. There is some good growth there. But given where the stock is trading right now, we just don't see a lot of value in it and think that investors would need a margin of safety and probably a pretty big one before considering the shares.

Stipp: Experiencing another dramatic move, but on the downside, was Valeant. There was some news this week from a short seller, a research firm. What is the story there? It has caused a lot of turbulence.

Glaser: This was an incredibly turbulent week for Valeant. The key flashpoint was a report that released on Wednesday alleging that Valeant basically set up these shell specialty pharmacies that allow it to essentially stuff the channel with drugs that they are not able to sell otherwise and recognize that revenue.

Management has categorically denied all of these claims, said that they are not founded, that revenue isn't being recognized in that way and only gets recognized when the drugs are actually in the hands of the consumers. The firm has come out very strongly against the claims, and that helped the shares come back a little bit. But they are still down substantially, and this has been a significant overhang this week.

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