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.