Weight Watchers stock analysis. Ticker: WW
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Back in March, Weight Watchers announced it was buying a platform that prescribes weight-loss drugs including Ozempic.
That news has pushed the stock up 167% year to date. But the company is not profitable right now and has a lot of debt. So let’s take a closer look…
At the current share price just above $10, Weight Watchers has a market cap of 813 million dollars. It’s got 91 million of cash but 1.4 billion of debt so the enterprise value is 2.1 billion.
Revenue over the last 12 months is 942 million and adjusted ebitda is 168 million but net income is minus 306 million and free cash flow is only 20 million.
That means Weight Watchers is valued at 2.3 times revenue and over 100 times free cash flow.
With so much debt on the balance sheet, Weight Watchers is in danger of bankruptcy. And recent trends don’t look good. Revenue for the first six months of fiscal 2023 were $469 million which is a 17 % decrease from the year before. In fact, Weight Watchers revenue has dropped every year since 2018 and the stock price has fallen 90% over that time.
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Join 9000+ investors: https://www.overlookedalpha.com
Back in March, Weight Watchers announced it was buying a platform that prescribes weight-loss drugs including Ozempic.
That news has pushed the stock up 167% year to date. But the company is not profitable right now and has a lot of debt. So let’s take a closer look…
At the current share price just above $10, Weight Watchers has a market cap of 813 million dollars. It’s got 91 million of cash but 1.4 billion of debt so the enterprise value is 2.1 billion.
Revenue over the last 12 months is 942 million and adjusted ebitda is 168 million but net income is minus 306 million and free cash flow is only 20 million.
That means Weight Watchers is valued at 2.3 times revenue and over 100 times free cash flow.
With so much debt on the balance sheet, Weight Watchers is in danger of bankruptcy. And recent trends don’t look good. Revenue for the first six months of fiscal 2023 were $469 million which is a 17 % decrease from the year before. In fact, Weight Watchers revenue has dropped every year since 2018 and the stock price has fallen 90% over that time.
#stockstowatch #investing #stocks #overlookedalpha
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NewsTranscript
00:00 Back in March Weight Watchers announced it was buying a platform that prescribes weight loss
00:04 drugs including Ozempic. That news has pushed the stock up 167% year to date. But the company is not
00:12 profitable right now and has a lot of debt. So let's take a closer look. At the current share
00:17 price just above $10 Weight Watchers has a market cap of $813 million. It's got $91 million of cash
00:25 but $1.4 billion of debt so the enterprise value is $2.1 billion. Revenue over the last 12 months
00:31 is $942 million and adjusted EBITDA is $168 million but net income is -$306 million and free cash flow
00:40 is only $20 million. That means Weight Watchers is valued at 2.3 times revenue and over 100 times
00:47 free cash flow. With so much debt on the balance sheet Weight Watchers is in danger of bankruptcy
00:52 and recent trends don't look good. Revenue for the first 6 months of fiscal 2023 were $469 million
01:00 which is a 17% decrease from the year before. In fact Weight Watchers revenue has dropped every
01:06 year since 2018 and the stock price has fallen 90% over that time. Most of Weight Watchers revenue
01:12 is made up of recurring subscriptions which is normally high quality. The problem is that the
01:17 Weight Watchers brand is seen as outdated and there is a lot of competition in the space with
01:22 low barriers to entry. So why is the stock up 167%? A lot is riding on Weight Watchers acquisition of
01:30 Sequence a telehealth platform that prescribes Ozempic. The market for weight loss drugs like
01:36 Ozempic is absolutely huge with sales expected to hit $14 billion next year. Sequence itself has
01:43 taken its sales to $6.5 million in the latest quarter from just $28,000 the year before. That's
01:50 an increase of over 20,000%. So Weight Watchers has made a smart move buying this platform just
01:56 as we are witnessing a boom in the market for weight loss drugs. The problem is Sequence
02:00 doesn't manufacture Ozempic, Novo Nordisk does and Novo Nordisk has run out of supply. As a result
02:07 Weight Watchers had to cut its revenue outlook from the drug from $45 million to $30 million
02:14 across the next two quarters. That news sent the stock down more than 20%.
02:18 Overall this is a highly volatile stock with a loaded balance sheet and an unpredictable outcome.
02:24 If Sequence can get its hands on more Ozempic and the stock continues its rally, Weight Watchers
02:30 might be able to raise enough capital to fix its balance sheet and gain some breathing room. In
02:35 that situation the stock could be a big winner. But with net debt of more than 7 times EBITDA
02:41 and a declining legacy business, the company doesn't have much time to get it right.
02:46 Weight Watchers has a new CEO who looks competent but a small uptick in subscribers last quarter
02:53 isn't enough evidence of a turnaround and no one seems to know when Ozempic supply will be sorted.
02:58 This is a stock worth watching but it's also a highly risky investment. But these are my personal
03:03 opinions not financial advice and I do hold some shares in Weight Watchers International.
03:08 For more detailed investing ideas make sure to join our newsletter at overlookedalpha.com