There have been many weight loss strategies over the years – diets, liposuction, intermittent fasting, supplements, you name it.
But the weight often remains stubborn, unfortunately.
In many cases, the reason why a weight loss method isn’t successful is not necessarily because the method itself is flawed, but rather because the individual may be struggling to keep up with the demands of their busy life. Anything that requires effort or work usually doesn’t sustain long enough to see the results.
What if there’s a prescription drug that has been scientifically proven to be the most effective weight loss solution in history?
Currently, drugs like Wegovy are gaining attention as they have been approved for weight loss applications.
Drugs like Wegovy were initially developed to treat diabetes, but have also been found to be effective for weight loss. This is because diabetes and obesity are related conditions, and the drug’s mechanism of action for controlling blood sugar levels can also impact weight management.
Wegovy are administered through injection pens, which require users to inject the drug directly into their body and only take a few seconds of effort.
In contrast to previous pharmaceutical weight loss treatments that typically yield a modest 5-10% weight loss, recent clinical trials of drugs like Wegovy have reported much more significant initial weight loss of 15-20%.
These drugs work by suppressing appetite and slowing down digestion, which can help users feel fuller for longer periods of time.
The weight loss drug market is experiencing a significant surge in sales, with analysts predicting an annual revenue of approximately $100 billion.
This growth is due in part to the success of drugs like Wegovy, which have been reporting strong sales and boosting revenue for pharmaceutical companies like Novo Nordisk.
In fact, Novo Nordisk has raised its sales guidance for 2023 in response to Wegovy’s success. As a result, the company’s share price has climbed 24% year-to-date and 47% from a year ago.
Instead of focusing on pharmaceutical companies that sell obesity drugs, I’d like to highlight a different player in the weight loss industry: WW International (WW), more commonly known as Weight Watchers.
This company offers a subscription-based weight management program that includes personalized coaching and food plans to help individuals achieve their weight loss goals.
Unfortunately, business hasn’t been good for WW International in recent years, with revenue declining for five consecutive years.
The introduction of weight loss drugs like Wegovy could potentially make matters worse for the company.
In fact, the company’s financial situation is so dire that it currently has negative equity, which means it owes more in debt than it has in total assets.
Despite WW International’s current financial challenges, there may be a glimmer of hope on the horizon. Recently, the company made a strategic acquisition by purchasing a telehealth company called Sequence.
WW International is planning to offer weight loss drugs like Wegovy to its subscribers, but in order to do so, it needs the necessary licenses and infrastructure to provide this service. This is where the acquisition of Sequence comes into play, as it is a perfect fit for WW’s needs.
Sequence is not a general telehealth platform, but rather focuses specifically on weight management. It offers an app that can track weight loss progress and provides access to dieticians and fitness coaches. By acquiring Sequence, WW International can leverage its existing platform and expertise to deliver weight loss drugs to its members
Sequence is a relatively new company that was founded in 2021 and already has 24,000 active members generating $25 million in revenue, and is cash flow positive. The acquisition makes sense for Sequence because it can tap into WW’s much larger subscriber base of 3.5 million people who are already interested in weight loss and would make good customers for Sequence’s weight management program.
Assuming that 20% of WW’s subscriber base goes on to subscribe to Sequence at a rate of $99 per month, this would generate an additional $832 million in revenue for WW, almost doubling its current revenue. This acquisition not only helps WW expand its offerings, but also allows it to capture new customers who are seeking more effective weight loss solutions.
The market agrees and WW share price has jumped 93% since the acquisition was announced.
A Goldman Sachs analyst even raised WW’s target price to $13, which means there’s still a possible 64% increase from its current price of $7.95.
Gary Black, managing partner of The Future Fund, took the opposite stance by shorting WW, arguing that the majority of its members are unlikely to upgrade their current $23 monthly subscription to the proposed $99 subscription.
Additionally, the weight loss drugs are too expensive at $840 to $1,200 per month, which is on top of the subscription fee. Most people would not be able to afford it, especially since it is unlikely to be covered by insurance. He estimates that only 20% of clinically obese individuals would have insurance coverage for the drugs.
My counter argument is that we should never underestimate the human’s desire to look good. With the rise of social media and the importance of image and appearance, people are more conscious of their physical appearance than ever before.
People often pay out of pocket for various elective procedures or treatments, such as cosmetic surgeries, that are not covered by insurance but can still be costly.
Even if only a small percentage of WW’s subscriber base decides to upgrade to the new weight loss program, it could still have a significant impact on the company’s revenue. A 20% conversion rate, as previously mentioned, would mean doubling WW’s revenue.
Using technical analysis, a potential price target for WW could be $28.74, representing a 262% increase from the current price. This projection is based on the idea that prices have a tendency to fill gaps left in a chart. WW experienced a significant gap down on August 11, 2021, and it’s possible that the stock will rise to fill that vacuum.
It’s important to keep in mind that WW is a speculative stock. The acquisition may not work out well or the drugs may not be as popular as expected. It’s crucial to do your own research and analysis, and to be prepared for the possibility of the share price declining.
