Is WW International Stock A Buy At $4.50?

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WW International

WW International (NASDAQ:WW) published a tough set of Q3 2022 results earlier this month, with both revenues and earnings missing estimates. While quarterly revenue declined by about 15% year-over-year to about $250 million due to a decline in digital subscribers, the company’s loss per share stood at $2.93 due to certain impairments. End of the period, digital subscribers declined by 17.7% versus last year to 3 million. The company also reduced its full-year revenue guidance to about $1.04 billion, down from its prior range of $1.05 billion to $1.09 billion. WW’s business faces considerable headwinds as the big health and fitness focus seen through the Covid-19 lockdowns has cooled off. 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 weight loss player.

WW stock now remains about 74% lower year-to-date and is down 89% from the highs seen in 2021. Investors are no longer valuing WW like a tech stock as the company’s digital business – which saw solid strong gains through the early pandemic – sees considerable subscriber attrition. Moreover, WW is quite highly leveraged, with total debt standing at over $1.4 billion, which is a concern in a rising interest rate environment.  We have marginally reduced our price estimate for WW stock from $7 per share to about $6.30 per share to account for the recent decline in results. However, our price estimate is still ahead of the $4.50 market price. There are a couple of reasons to remain positive about the stock at current levels. The risk-to-reward trade-off for WW stock appears favorable, with WW trading just about 0.3x 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.

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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 Returns Nov 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WW Return -3% -73% -62%
 S&P 500 Return 3% -16% 78%
 Trefis Multi-Strategy Portfolio 8% -16% 231%

[1] Month-to-date and year-to-date as of 11/13/2022
[2] Cumulative total returns since the end of 2016

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