Goldman Sachs, known for its Conviction List, has identified WW International (WW), formerly known as Weight Watchers, as the stock with the highest predicted gain in the next 12 months. With an impressive projected increase of 117%, WW International takes the top spot on the list for November.
A Roller Coaster Journey
The history of WW International, which debuted in 2001, resembles a roller coaster ride. Often associated with yo-yo dieting, the stock has been a constant source of disappointment, with sporadic bursts of hope. The company itself was established in 1962—an era during which America's obesity rate has tripled. This raises doubts about the effectiveness of their weight loss programs. Furthermore, Novo Nordisk (NVO) and Eli Lilly (LLY) have introduced highly promising weight loss medications, adding to skeptical perspectives.
Signs of Stabilization
Anticipated Third-Quarter Results
WW International is set to announce its third-quarter results on Thursday after the closing of the stock market. Share prices have witnessed a remarkable doubling this year—from under $4 to over $13 before recently settling at around $8.
The future holds both uncertainty and potential for WW International, making it a fascinating addition to Goldman Sachs' Conviction List.
Oprah Winfrey's Influence on Weight Loss Drugs
Oprah Winfrey, a well-known investor and board member of WW, inadvertently caused some stir in the stock’s volatility in September. During an event, she expressed her initial thoughts on new weight loss drugs, referring to them as an "easy way out" that she personally wouldn't take. Unfortunately, a partial quote published the following day led to a significant drop in shares. However, Winfrey later clarified to The Wall Street Journal that her comment was taken out of context. She emphasized that these medications are indeed "an important and viable option."
It's worth noting that Winfrey has visibly slimmed down in recent times, but she hasn't indicated whether diet drugs played a role in her transformation. Nevertheless, her endorsement of such drugs is undoubtedly crucial to WW investors due to her influential position.
Efforts were made to contact Winfrey through WW, but as of now, there has been no response.
Weight Loss Drugs vs. WW Subscription
Turning our attention back to the stock, Goldman analysts claim that WW has undergone a transformation and has a promising path for growth. However, it begs the question – why would investors opt for an additional subscription fee if weight loss could be as simple as an injection or a pill in the near future?
One possible reason can be seen in the recent decision made by Blue Cross Blue Shield of Michigan. Weight loss drugs come with a high price tag, and it is understandable that insurance companies would prefer patients to focus on eating less and exercising more. However, drug companies argue that individuals struggling with obesity are wired differently from those who are slim. Therefore, weight loss is not solely a matter of willpower, and treating obesity can potentially prevent costly diseases associated with it.
Starting last month, Blue Cross Blue Shield of Michigan now requires its patients to attempt lifestyle changes for a period of six months before qualifying for coverage of weight-loss drugs. Notably, the insurer specifically mentioned WW and Noom as endorsed weight-loss programs.
Sustainable Recovery for WW
If WW is indeed undergoing a sustainable recovery, and not just another false start, that could be one path. If diet plans can pitch themselves to insurers as gatekeepers to obesity meds, more patients might sign up to support their bid for coverage. But given the company’s long history of disappointing returns, investors should wait for more signs of operating momentum, beginning with Thursday’s report.
