WW International Inc. (NASDAQ: WW), Oprah’s Winfrey’s stock of choice and the company formerly known as Weight Watchers International, has been slimming down during the coronavirus sell-off. While the stock market is playing a game of the biggest loser, Weight Watchers stock is far outpacing most.
It’s safe to say that the markets have been tightening their belts as COVID-19 has spread across the world. The Dow Jones industrial average, S&P 500 and Nasdaq have each lost about 25% since the beginning of the year. This compares to the WW stock price, which has seen a drop of 55% in the same period.
Although shedding weight is the ultimate goal for these consumers, investors would rather this not be at the expense of the stock. Also, after all this selling and the renewed focus on health, does it make the case for WW shares to shoot back up in the long term?
Coronashock
The novel coronavirus has absolutely ravaged the broad markets and shuttered the global economy, but more importantly, it has hospitalized thousands of people. According to the Centers for Disease Control and Prevention (CDC), people with underlying health problems are most at risk for COVID-19. While these underlying health problems manifest in different ways, it’s a safe bet that overweight people make up a significant portion of those at risk.
Being overweight has been proven to manifest more underlying health issues, many of which fall under the CDC’s high-risk profile. So what does that mean for WW’s business of turning the overweight into healthy people through both its weight loss programs and weight management programs?
Right now, the world is focused on hygiene and preventing the spread of the virus. Investors may wonder what comes next. After the virus is eradicated and proper treatment is implemented, it’s plausible that this scare will prompt people to work on their underlying health issues. Obesity is a big one.
Tipping the Scale
Again, WW stock has sold off more than 55% since the beginning of the year. The decline started before the coronavirus spread, but it was only exacerbated when Weight Watchers reported fourth-quarter and full-year results on February 25.
The fourth-quarter results were more or less par for the course. Still, the coronavirus wiped out any meaningful fundamentals. The company said that it had $0.42 in earnings per share on $333 million in revenue, coming in just above Wall Street’s consensus estimates of $0.39 per share and $331 million.
Although the investor reaction was not positive (in the face of market headwinds), there was still some progress in the report. The company saw subscriber growth of 8% year over year, to a record 4.2 million at the end of the quarter.
Chief Financial Officer Nick Hotchkin (who is also Operating Officer, North America and President, Emerging Markets) commented on subscriber growth:
We ended 2019 with 4.2 million subscribers, a record level for a year-end and up 8% from the end of 2018, with subscriber growth in all of our major geographic markets. Subscriber growth trends improved each quarter throughout the year, a testament to our global team’s focus and efforts to improve marketing execution. Member recruitment so far in 2020 has been well above the prior year, as expected, and is reflected in revenue and earnings growth guidance for full year 2020.
CEO and President Mindy Grossman also had some positive comments on the report.
Deliverance
There’s no doubt that the coronavirus has drastically shifted the economy. The “stay-at-home” economy is getting increasingly larger as more people are practicing social distancing and some even quarantine. As a result, companies that cater to this lifestyle have become increasingly popular, especially those that make deliveries.
Here’s the thing: WW doesn’t offer a delivery service, but it is partnered with one and has been since last year. Blue Apron Holdings Inc. (NYSE: APRN) offers this meal kit delivery service. Blue Apron has not been the most popular company, and in fact it was beaten up until COVID-19 hit. Now that more people are staying home, Blue Apron has seen its service take off, as its stock has demonstrated.
If Blue Apron moves more meal kits, WW wins too, but the question is how much?
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