WW International stock (NASDAQ:WW) posted a weak set of Q2 2022 results earlier this month, as the big health and fitness focus seen through the Covid-19 lockdowns continues to cool off with people heading back outdoors. Moreover, mounting competition from a slew of new-age, AI-driven weight management applications and independent experts on social media, also appears to be impacting the near six-decade-old weight loss player. Over Q2, total revenue declined by about 13.5% to $270 million, with the digital business, which relies on mobile apps to provide weight management services, seeing its subscriber base fall by 17% year-over-year to 3.1 million. The company’s overall subscriber base also declined by around 12% to 4.3 million. WW’s outlook also remains tough, with the company cutting its full-year revenue guidance to a range of $1.05 billion to $1.09 billion from a previous range of $1.09 billion to $1.14 billion. This would mark a decline of about 8% versus last year at the mid-point.
WW stock now remains down by over 80% from the highs seen in 2021 and also remains down by about 56% year-to-date. Investors are no longer valuing WW like a tech stock as the digital business – which saw solid strong gains through the early pandemic – sees considerable subscriber attrition. We have reduced our price estimate for WW stock from $15 per share to about $10 per share to account for the recent decline in results. However, our price estimate is still ahead of the $7 market price. There are a couple of reasons to remain positive about the stock, at its current levels. The risk-to-reward trade-off for WW stock appears favorable, with WW trading just about 0.5x forward revenue, down from levels of about 2.5x in mid-2021. The company is also taking steps to shore up demand, as it looks to build a diabetes-focused business, while also rolling out a program called PersonalPoints, which completely customizes weight loss plans for each member. The company’s Studio business, which sees higher per-subscriber billings, is also seeing a turnaround with subscribers growing by about 11% versus last year to 0.8 million. Gross margins have also trended a bit higher, driven by growth in the studio business and also due to better cost management.
See our analysis WW International Valuation: Expensive or Cheap for more details on WW’s valuation and comparison with peers. Check out our analysis on WW International Revenue: How does WW Make Money for an overview of WW’s business model, key revenue streams, and how they have been trending.
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With the broader market sell-off and declining demand for weight management services, WW has fallen 56% this year. Can it drop more? See how low can WW International stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-10%||91%|
|Trefis Multi-Strategy Portfolio||8%||-7%||267%|
 Month-to-date and year-to-date as of 8/14/2022
 Cumulative total returns since the end of 2016