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WW International Inc WW

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Digital Subscriber Decline Drives Sales Miss for WW Amid Tough Q3; Shares Remain Undervalued

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

No-Moat WW International posted unimpressive third-quarter results, seeing year-over-year digital subscriber declines (down 3%) as the firm navigated growing pains associated with its renewed emphasis on digital offerings. Consolidated end-of-period subscribers fell to 4.5 million at the end of the quarter, driven by sustained pressure in the studio business (with subscribers down 10.6% annually), pushing segment revenue (and product sales) lower than we had initially contemplated. As we digest third-quarter results, balancing time value of money, lower top-line guidance (to $1.2 billion from $1.3 billion for the year), and the anticipated launch of the food innovation program, we expect to lower our $26.50 fair value estimate by a low-to-mid-single-digit percentage. We continue to view the shares as undervalued, trading at approximately a 30% discount to our revised fair value estimate.  

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Company Profile

Business Description

WW International (Weight Watchers rebranded) is the largest global provider of weight-loss solutions, generating $1.4 billion in 2020 revenues (roughly 1.9% of the $71 billion U.S. weight loss market, and a little less than 0.5% of the global weight loss market, per our calculations and Research and Market estimates). The firm has expanded its purview beyond its historical dietary focus, now offering an integrated wellness solution that extends into sleep tracking, fitness, mental health, and nutrition services through its mobile application ecosystem. The company also maintains a small ($45 million) health solutions segment, through which access to the firm's myWW+ platform is provided to employees of small- and medium-business clients in the U.S.

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 Sep 30, 2021
Fiscal Year End Jan 2, 2022
Stock Type Slow Growth
Employees 10,000