On Thursday, UBS adjusted its outlook on Weight Watchers International (NASDAQ:WW), reducing the company's stock price target to $3.00 from the previous $9.00. Despite the significant decrease, the firm maintained a Neutral rating on the stock. The adjustment follows Weight Watchers' reported year-over-year (YoY) subscriber growth for the first time since 2020.
Weight Watchers concluded the fourth quarter of 2023 with a total subscriber increase of 7.1%, reaching 3.798 million subscribers. This growth is a notable change from the subscriber declines of 5.7% in 2021 and 15.0% in 2022. The North American market accounted for 2.499 million of these subscribers, with the remaining 1.299 million coming from international markets.
The company has now fully integrated its platform, connecting its core digital members to its emerging Clinical business. The integration strategy appears to be paying off, as evidenced by the increase in longer-term commitments from new subscribers.
Approximately 75% of sign-ups through January opted for a 10-month or longer subscription, compared to 25% in January 2023 and 45% throughout the entire previous year.
The Clinical business showed a strong performance in the fourth quarter, adding 22,000 members, which was a substantial increase from the 8,000 and 10,000 members added in the third and second quarters, respectively. Notably, the majority of the current 67,000 clinical members were previously subscribers to Weight Watchers' services.
Weight Watchers anticipates that its Clinical members will more than double in 2024, expecting to reach between 140,000 to 160,000 members and projecting revenues of approximately $100-110 million for the year, a significant jump from $30 million earned in roughly eight months of 2023.
Still, UBS suggests that the stock will likely hover around current levels until the business model demonstrates more certainty.
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