Why is Weight Watchers Stock So Cheap?

Go beyond the points, the new “WW” is focused on wellness – and year-round results for investors.

Andrew Willis 24 March, 2023 | 5:04AM
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Interested in more cheap stocks? Check out Canopy Growth, from last week.

Andrew Willis: When you see that weight loss companies are offering discounts as high as 60%, you start to wonder if people are giving up on their New Year’s Resolutions.

Equity analyst Sean Dunlop says businesses like Weight Watchers are extremely seasonal, which means that if sales miss in the first half of the year, they’re effectively out of luck until the following January. But Weight Watchers, or should I say “WW”  has an unusual goal to grow its subscriber base this year in the 2nd half with a focus on wellness rather than only weight loss.

Good mental health, sleep, exercise – and of course diet make up the company’s new moniker, with medicines included in the holistic approach. Now let’s see if that translates to lasting results for investors.

For Morningstar, I’m Andrew Willis.

 

bulls Bulls Say

  • Exposure to the quickly growing medicinal weight loss category through the firm's Sequence acquisition could improve user retention across the WW ecosystem.
  • A re-emphasis on core assets could see the firm's digital and workshop businesses return to modest growth, while stripping out unnecessary costs associated with low yielding D360, consumer packaged goods, and business-to-business-to-consumer efforts.
  • As the macroeconomic environment normalizes, the in-person studio business should return to growth, proving highly incremental.

bears Bears Say

  • An inability to effectively traverse sales channels and service modalities could suggest permanent impairment of the WW brand, reducing pricing power in the future.
  • The emergence of price-competitive and effective weight loss drugs like Wegovy, particularly if covered by insurance, could prove existential for WW.
  • The emergence of more-standardized nutritional scoring systems (like Nutriscore, in Europe) could threaten WW's IP, with the firm's SmartPoints system representing its key differentiator.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
WW International Inc1.21 USD-3.20

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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