- Investment bank’s analysts claim the shares could double
- Calorie-counter shifted to more holistic weight-management strategy
- 20 million lapsed subscribers a large opportunity
You’ll know the name, seen the adverts on TV, and perhaps have even had a membership at some point, but investors are being encouraged to buy stock in calorie-counting club Weight Watchers International (WW:NASDAQ).
In the past, if you wanted to shed the pounds you’d clock up the running miles and count the calories. For years, Weight Watchers plumped up profits from the second category, becoming internationally recognised for weekly meet-ups and weigh-ins.
Popping a pill was generally a last resort but a new wave of obesity drugs has forced the firm into a rethink, and now it presents itself as a more holistic option for weight management. Goldman Sachs analysts believe that its new approach, which encourages members to incorporate regular exercise, calorie-counting and pharmaceutical treatments together, is a more effective way to give its subscribers a better, healthier lifestyle, creating the potential for share price recovery.
BILLIONS INTO MILLIONS
The anorexic stock needs the lift. Since 2018, the share price has done some serious slimming of its own, down from over $100 to $6.70, turning the company from a multi-billion-dollar enterprise into one valued at barely $500 million.
Revenues and profits have been falling for years, and the company plunged to a $251 million net loss in 2022 (to 31 Dec).
But there is hope, according to Goldman. The investment bank’s analysts point out that the company says more than 20% of its subscribers are interested in incorporating pharmaceutical diet aids into their weight-loss goals. What’s more, the firm reckons that by wrapping these drugs in a total lifestyle approach to weight management gives them a better chance of being covered by health insurance policies – immediately making them more affordable.
BAITING THE LURE
Weight Watchers has around 20 million lapsed subscribers, Goldman says, so if it can entice back a fifth of those former members with a refreshed suite of weight-loss solutions, then the company’s shrinking subscriber base – across both the online and meeting segments – might start to fatten up again.
The kicker, according to Goldman, is that because the firm has built up such impressive infrastructure over the years, it can offer these new services cost-efficiently, bulking up margins along the way. Operating margins last year were 14.7%, according to data from Investing.com, way down on its 20% five-year average.
Get this right and Goldman thinks the stock could roughly double over the next year or so to $13.
