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WW International Inc WW

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Morningstar’s Analysis

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Mix Shift Stands To Benefit Profitability Ahead at No-Moat WW; Shares Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

While no-moat WW continues to struggle with profitability, there are signs that the company’s restructuring efforts are beginning to pay off. Total revenue fell 17% year over year to $331.8 million, missing our $350 million forecast, largely impacted by the reduction in workshop subscribers. However, adjusted gross margin increased 700 basis points to 60% from 53%, well ahead of our anticipated 53.5% as the ongoing shift to the higher-profit digital channel persists. WW posted a per share loss of $0.26 (including a one-time $0.06 negative impact), below last year’s $0.09 loss, but ahead of our expected $0.38 loss. Overall, we don’t anticipate any material change to our $35.50 fair value estimate, and view shares as undervalued.

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Company Profile

Business Description

WW International (formerly Weight Watchers) is a leading player in the $70 billion-plus global weight-management industry. As of December 2020, the company had 700,000 active meeting subscribers worldwide (run by over 7,000 meeting coaches) and 3.7 million active digital subscribers. The company encourages healthy weight loss through exercise, nutrition, and portion control, with aspirations of evolving into a more holistic health/wellness provider. WW also offers online 24/7 Expert Chat and personal coaching weight-management solutions.

675 Avenue of the Americas, 6th Floor
New York, NY, 10010
T +1 212 589-2700
Sector Consumer Cyclical
Industry Personal Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Jan 2, 2022
Stock Type Slow Growth
Employees 10,000