Goldman Sachs Thesis On Weight Watchers Is 'Absurd,' Fund Manager Says Why He'd Short The Stock

Shares of WW International Inc WW, the parent company of diet and fitness platform Weight Watchers, jumped almost 60% on Tuesday after a Goldman Sachs GS analyst upgraded the stock and substantially raised its price target from $3.80 to $13.

The upgrade came after WW confirmed the purchase of Sequence, a telehealth provider that connects patients with doctors who can prescribe weight-loss drugs like Ozempic and Wegovy.

Yet one influential fund manager does not agree with Goldman Sachs.

Gary Black, managing partner of The Future Fund — the firm behind the Future Fund Active ETF FFND — said that Goldman Sachs' thesis implied Weight Watchers members will pay Sequence $90 a month to get access to drugs such as Wegovy and Mounjaro, when the average member today pays a monthly $23.

"The flaw with the thesis: most insurance plans won't cover the cost of these drugs," wrote Black on Twitter.

Without insurance coverage, these drugs cost patients between $840 and 1,200 a month, says Black, and only 20% of insurers cover them for the clinically obese.

The fund manager said his firm would take a completely opposite stance, shorting WW stock, an action done when fund managers expect the price of a stock to decline over time.

Also Read: What Is Short Selling Stocks? A Beginner's Guide to Short Selling

Meanwhile, Goldman Sachs analyst Jason English said if WW can grab just 3% of the total addressable market for weight loss drugs in the U.S., it could add $2 in earnings per share.

Black called the WW rally a deja-vu. On March 7, WW stock climbed 70% in one day, to later quickly return to their original price.