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WW International's New Offering Seen by Goldman Sachs Analyst as Key to Subscriber Turnaround
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Shares of weight loss and maintenance stock WW International (US:WW), formerly known as WeightWatchers gave back little today after surging 59% higher in trading on Tuesday on the back of a broker upgrade from Goldman Sachs (US:GS) analyst Jason English.
The upgrade saw Goldman raise its target for the WeightWatchers stock price threefold, to $13.00 from $3.80. By mid afternoon on Wednesday, the shares were trading at $6.54 a piece.
WW International’s core business is its weight management program, which is based on a points system that assigns values to different foods based on their nutritional content.
The company has faced challenges in recent years as the weight loss industry has become increasingly competitive, with the rise of free mobile apps and online communities. WW International has also faced criticism for promoting a dieting culture that can lead to unhealthy eating habits and for its marketing tactics.
The headwinds have pushed the WW stock price to all-time low levels not seen since 2015 when the company was facing deteriorating customer attendance. On a five-year view, the stock is trading 90% lower.
Wellness Rebrand
In an effort to address these challenges, WW International has rebranded itself in recent years, focusing on wellness and lifestyle changes rather than just weight loss.
The declining customer base was offset by a surge of digital subscribers early in the pandemic which convinced some investors to believe the successful digital transformation was occurring.
WeightWatchers on Monday closed its deal to acquire of Sequence which will give the company a pharmaceutical-based clinical subscription service that it can integrate with its legacy behavioral-based weight management offering.
WW announced the Sequence deal in early with a purchase price of $106 million. The company has generated an annual run rate of $25 million in sales and is currently cash flow positive.
Goldman highlighted that the new service offering will help WW capture a cohort of consumers who will turn to it for help navigating an increasingly complex field of pharmaceutical solutions.
“WeightWatchers is at a pivotal point where we can build new capabilities that expand our market, reinforced by our foundational strengths,” said Sima Sistani, CEO of WeightWatchers. “Given the advancements in chronic weight management medications, entering into clinical interventions, for those who medically-qualify, is a natural next step for WeightWatchers.
Analyst English believes that if the company can capture even a mere 3% of the addressable population in the US, it could add up to $2 of EPS contribution for the company by 2026.
For now, Goldman looks like the outlier; or, perhaps just ahead of the crowd. Fintel’s consensus metrics data has a $4.96 target price for WW, suggesting the broader market expects the stock to decline from current levels post Tuesday’s rally.
Officers Buying
Research from the Fintel platform highlighted significant officer buying activity that has occurred in the stock over recent months.
There have been six company officers who purchased shares in the company during November and December of 2022. The officers included CEO Sistani, several board members and other insiders of the company.
Fintel’s Officer Sentiment Score of 74.25 is bullish on the company ranking WW in the top 3%, at in 385th out of 11,908 globally screened securities.
The forward forecast data for WW suggests analysts were forecasting another year of sales declines in 2023 before returning back to a period of growth from 2024 onward.
This article originally appeared on Fintel
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