Weight Watches Parent's Stock Soars Again On Obesity-Drug, Goldman Turns Bull

Tyler Durden's Photo
by Tyler Durden
Tuesday, Apr 11, 2023 - 11:20 PM

WW International, previously known as "Weight Watchers," jumped 46% Tuesday morning after the company said it completed the acquisition of a telehealth provider that will help it tap into the booming market for new obesity drugs. Adding more bullishness today was a note by Goldman Sachs, upgrading the stock to a "buy" from "neutral." 

WW's deal for subscription telehealth platform "Sequence," which prescribes weight-management and diabetes drugs, was first announced in March. Back then, shares soared more than 79% to a seven-month high of around $7 handle on March 7 but quickly fell back to the $4 handle as shorts piled in.

In combination with the deal closing, Goldman Sachs analyst Jason English upgraded his rating on the stock to buy from neutral following the acquisition of Sequence. 

"With the now completed acquisition of Sequence, WW will begin to offer a pharmaceutical based clinical subscription service that it can integrate with its legacy behavioral based weight management offering.

"With this new service offering we expect a cohort of consumers to turn to it for help navigating what is poised to be an increasingly complex field of pharmaceutical solutions given its legacy brand equity/credibility in the weight management field and its ability to reach an extensive database of current (4M) and lapsed (20M) WW program users who have previously demonstrated a willingness to pay for help," English wrote. 

The WW turnaround emerges as the GS team estimates peak obesity market sales will be north of $30 billion by 2032 for certain pharmaceutical products. Several big pharma companies, including Eli Lilly, Novo Nordisk, and Zealand, among others, have trials and product launches of their obesity drugs planned this year. 

"Our top-down build suggests over 15mn addressable users today and likely doubling by 2030," English wrote. 

WW is at a pivotal point where it's building new capabilities that expand its market to offer new drugs to 'make America slim again.' 

English revised GS' 12-month price target for WW to $13.00, a significant increase from the previous $3.80, in light of the sweeping changes at the company.

Shares of WW soared as high as 46% this morning, the most significant gain since the March 7 surge. Propelling the move today is also an abundance of shorts who piled in after shares peaked around the $7 handle last month. About 8.2 million shares are short, equating to about 15% of the float. 

With the now-completed acquisition of Sequence, WW will be able to capitalize off tens of millions of obese Americans with new pharmaceutical drugs to tackle weight loss. 

WW should consider an advertising campaign titled: 'Make America Slim Again'...