WeightWatchers’ stock has taken a beating with the rise of breakthrough dieting drugs — but the company can still profit from members who are “puking their guts out” after taking medications like Ozempic, according to a Wall Street analyst.
Shares of WW International plunged 25% on Thursday when Oprah Winfrey said she was leaving the diet company’s board to “eliminate any perceived conflict of interest around her taking weight-loss medications” – a fact she conceded last year amid widespread speculation about her slimmed-down figure.
While Winfrey’s exit has fueled questions about WeightWatchers’ relevance, weight-loss patients still “need advice on what to do when they over-ate at a restaurant and are now puking their guts out” because of the side effects of drugs like Ozempic or Wegovy, according to DA Davidson analyst Linda Bolton Weiser.
“They need advice on what to do with their flabby excess skin once they have lost 100 pounds,” Bolton Weiser wrote in a Monday research note to clients. “That’s why an investor would buy WeightWatchers instead of Eli Lily or Nordisk.”
Bolton Weiser has a ‘buy’ rating of WeightWatchers and a price target of $12.50.
WeightWatchers shares slid 3.8% Monday to $3.25 — down 53% from $7 a year ago and down 83% since a peak of $13.21 in October.
Bolton Weiser said she was was responding to a junior analyst who posed the question, “Why would an investor be interested in investing in WeightWatchers, which prescribes the weight loss drug, when they could invest in Eli Lilly or Nordisk, the makers of the drug[s],’ according to the note.
The New York-based company’s shares have been plummeting for the past year as the diet drugs become mainstream and clobber legacy diet brands like WeightWatchers.
A year ago, WeightWatchers paid $106 million to acquire Sequence, a tele-health subscription service that prescribes Ozempic and other weight lost drugs.
The company’s chief executive, Sima Sistani, said on an earnings call last week that Weight Watchers is focused on providing “care” to these new customers taking diet drugs, who pay about $100 a month for the prescription service and access to the Weight Watchers Clinic.
“We are going to market right now.. speaking to the fact that what we’re offering is great care and a membership that is going to help them with their weight health,” Sistani said on an earnings call last week in which she used the word ‘care’ 19 times.
Meanwhile, Winfrey’s association with WeightWatchers came to end last week after a nine-year run when its shares would spike each time she posted a missive on her social media accounts about her weight loss or eating habits.
Over the summer, Winfrey reduced her stake in the company from roughly 10% to just 1.4%.
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