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WW International Inc WW

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Morningstar’s Analysis

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WW Shares Still Look Cheap, but We Lower Our FVE on Margin Pressure and Slower Top-Line Growth

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

We're shaving our fair value estimate for no-moat WW International to $26.50 per share from $35 previously, as we adjust for staunch competitive headwinds, declining returns on advertising spending, and slowing revenue growth in a hypercompetitive weight-loss market. While the firm's 2021 debt restructuring program provides a degree of breathing room (pushing maturities to 2028 and 2029 and lowering sinking fund obligations to $10 million per year from $77 million), we maintain our very high uncertainty rating, with a strong dependence on seasonal marketing, dietary innovation, and industry promotional activity suggesting the need for a wide margin of safety. Shares continue to look attractive, trading at around a 33% 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 Jun 30, 2021
Fiscal Year End Jan 2, 2022
Stock Type Slow Growth
Employees 10,000