Jefferies Downgrades WW International On Outlook

WW International Inc WW announced mixed results for the second quarter, but its the lowered guidance raises concerns around its near-term momentum and revenue generation, according to Jefferies.

The WW International Analyst: Stephanie Wissink downgraded the rating for WW International from Buy to Hold, while reducing the price target from $41 to $30.

The WW International Thesis: Management’s latest guidance “left many questions unanswered, suggesting mid-year churn and higher costs to retain alongside heightened investment spend,” Wissink said in the downgrade note.

The analyst cited WW International’s continued shift toward digital as a positive, saying that it now represents 85% of sales.

However, she noted, “Management's prior guide of a counter-seasonal pattern to member growth proved ambitious and the reset is more significant than we would have expected.”

“Rationale was tied to 'industry trends' but we struggle to find similar weakening patterns among other wellness goods & services. Product rev -5% Y/Y and -26% seq was also below our model,” Wissink added.

The analyst reduced her earnings estimates for fiscal 2021 and 2022 from $2.14 per share to $1.69 per share and from $2.62 per share to $2.17 per share, respectively.

WW Price Action: Shares of WW International had declined by 27.92% to $23.32 at the time of publication Wednesday.