WW International (NASDAQ: WW) is scheduled to report its Q1 2021 earnings within the subsequent few weeks. We count on Q1 2021 revenues to come back in at about $335 million, barely forward of the consensus estimate of $332.6 million, with the corporate doubtless posting a loss per share of about -$0.23, in comparison with -$0.24 per the consensus. Whereas revenues are prone to enhance sequentially, pushed by seasonality, they’re prone to decline by about 16% year-over-year, pushed by declines within the Studio enterprise (subscriber base was down -42% in This fall 2020), with individuals staying at house and avoiding public locations resulting from Covid-19. Nevertheless, this needs to be partly offset by continued progress within the digital enterprise. Over This fall 2020, WW’s Digital subscribers grew 24% year-over-year and digital subscriber provides truly helped whole memberships develop 4% year-over-year.
Whereas WW Inventory rallied by over 50% for the reason that starting of the 12 months to ranges of round $36 in March, it has corrected since then to about $28 per share partly resulting from blended commentary from brokerages. That stated, we expect WW Inventory stays a comparatively good worth at present ranges, buying and selling at simply over 18x our projected 2021 EPS for the corporate. The inventory ought to see significant beneficial properties if the corporate beats expectations over Q1 and continues to make headway with its digital push. Our interactive dashboard evaluation on WW International Pre-Earnings has extra particulars.
[12/30/2020] Why Has WW Inventory Declined Regardless of Its Digital Transition?
WW International (previously referred to as Weight Watchers Worldwide
This might doubtlessly be resulting from considerations of upper competitors. Whereas the load administration market has all the time been fairly fragmented, the pattern of digital-first corporations centered on serving to individuals handle their well being is rising. For instance, the load loss app Noom – which makes use of synthetic intelligence instruments and human coaches – has grown rapidly. As of early 2020, it had over 50 million downloads (doubtless largely non-paying), and its income practically quadrupled over 2019 to $237 million. WW Worldwide, with its Studio and Digital enterprise mixed, had underneath 5 million subscribers as of the final quarter. One other digital well being app, Lifesum, which has about 45 million customers globally, has teamed up with Amazon
[11/30/2020] Weight Watchers Digital Transformation
Whereas WW International (previously referred to as Weight Watchers Worldwide) has seen its inventory recuperate considerably from lows seen in March, it stays down by about 15% 12 months to this point. That is in distinction with the broader S&P 500 which is up by about 13% over the identical interval. The decline is pushed primarily by decrease Revenues on the firm’s Studio enterprise (43% of whole income combine in 2019), which was impacted as individuals stayed house and averted public locations resulting from Covid-19 lockdowns. Individually, a Q3 earnings miss has additionally impacted the inventory to a sure extent. That stated, WW Worldwide’s efficiency on the Digital entrance has been stable. Digital Revenues grew by about 23% in Q3 and had been up by 18% over the 9 months ended September 2020. In actual fact, whole memberships rose to 4.66 million, a rise of greater than 5% year-over-year led by progress within the digital house. As the corporate transitions from a brick and mortar enterprise mannequin to a extra digital-first mannequin, earnings must also enhance. As an example, in Q3 gross margins expanded to 59.2%, up from about 55.8% final 12 months, whereas Working Margins additionally expanded by about 170 foundation factors.
See our evaluation on What Drove 33% Decline WW International Stock Over The Last 3 Years? for extra particulars on what’s driving the corporate’s efficiency and valuation.
Whereas the markets have typically rewarded corporations which have digitized and moved to extra asset-light enterprise fashions, WW Worldwide hasn’t benefited from this but. The corporate’s valuation seems enticing, buying and selling at about 18x consensus 2020 EPS and 14x consensus 2021 EPS. Contemplating this, we expect the inventory might have some upside within the near-to-medium-term. Certain, the load administration market is getting extremely aggressive given the slew of weight administration apps and exercise trackers, however contemplating WW Worldwide’s established model, enticing valuations, and strong digital progress, the inventory might supply upside with an affordable margin of security for buyers.
[9/21/2020] Regardless of 75% Leap, Weight Watchers Inventory Has Scope For Extra
Regardless of a 75% rise for the reason that March lows of this 12 months, on the present value of round $20 per share we consider Weight Watchers stock (NASDAQ
Among the inventory value decline over the past two years is justified on condition that the corporate’s earnings per share determine has shrunk practically 30% resulting from a pointy discount in margins. Furthermore, a 4.4% enhance in share excellent additional contributed to this share value decline. Notably, although, the corporate’s revenues have seen a wholesome 8.1% progress between 2017 and 2019.
Lastly, Weight Watchers’ P/E a number of expanded from 17x on the finish of 2017 to 22x by the tip of 2019. Whereas the corporate’s P/E has decreased to 11x, it appears to be undervalued when the present P/E is in comparison with ranges seen prior to now years – P/E of 22x on the finish of 2019 and 17x as lately as late 2017. We consider the inventory is prone to witness a gradual upside regardless of the current rally and the potential weak spot from a recession-driven by the Covid outbreak.
How Is Coronavirus Impacting Weight Watchers’ Inventory?
The outbreak of Coronavirus has rattled the inventory market and the broader economic system. The pandemic, coupled with a broader financial slowdown, has adversely impacted client spending within the wellness and health business. As individuals stayed house and averted public locations, the corporate’s high-margin studio enterprise took a success. This was evident from the truth that the corporate noticed a 27% lower within the studio revenues whereas the corporate’s digital enterprise remained strong, with digital revenues surging by greater than 13% in Q2 2020 earnings (ending June). Additional, the corporate’s digital member signup developments have remained upbeat, with digital subscribers reaching an all-time excessive of three.9 million. Furthermore, Weight Watchers has a powerful retention price, which is prone to mitigate the impression on the corporate’s prime line. Regardless of a powerful retention price and a sturdy digital enterprise, we count on Weight Watchers’ revenues to witness year-over-year declines in 2020 as a result of steep fall in its studio enterprise. To sum issues up, though Weight Watchers’ revenues are prone to be decrease in FY’20, Weight Watchers’ inventory at the moment appears undervalued resulting from its upbeat digital enterprise and a powerful retention ratio.
Furthermore, over the approaching weeks, we count on continued enchancment in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations. Following the Fed stimulus, which set a flooring on worry, the market has been prepared to “look by way of” the present weak interval and take a longer-term view, with buyers now primarily focusing their consideration on 2021 outcomes.
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