[ad_1]
Sima Sistani, WW International CEO, August 16, 2023.
Scott Mullin | CNBC
WeightWatchers CEO Sima Sistani says the company’s financial position is strong and new clinical business related to the GLP-1 weight loss drug threat is growing faster than expected. It sent out an internal memo trying to reassure employees.
The memo, shared with CNBC, comes amid heavy selling of WW stock amid concerns about the company’s debt burden and growth prospects for its core weight-loss business, with the iconic weight-loss company’s stock price below $150 million. This was announced in response to the decline in the stock price. New blockbuster drugs such as Novo Nordisk’s Ozempic and Wigoby, and Eli Lilly’s Zepbound.
“I would like to take a moment to address the breathtaking media coverage,” Sistani told employees in his memo.
At the same time as the earnings announcement on February 28, news broke that Oprah Winfrey would resign from the company’s board of directors and donate all of the company’s stock to the museum’s endowment. It fell more than 20%. It stabilized later that week. But since then, WW stock has been on a sell-off, hitting a 52-week low on Thursday. The stock price has fallen 58% in the past month. The stock is prone to volatility due to debt burdens and short-term interest rates, as well as general concerns about the impact of new weight-loss drugs.
Concerns about the company’s high debt have made new headlines in recent weeks, but the issue is not new, with much of the debt not coming due for years.
“These headlines are often just speculation,” Sistani said in a letter to employees. “We have strong liquidity and are not short on cash. We have very attractive long-term debt contracts with no maturities until 2028 and 2029.”
Guggenheim Partners analysts said in a note Thursday that WW’s debt includes approximately $945 million in non-amortizing term loan balances due in April 2028 and $500 million in notes due in April 2028. He said he was “not concerned” about his ability to repay the debt. April 2029.
The company ended 2023 with about $109 million in cash, Guggenheim said.
At its current market capitalization and nearly $1.5 billion in debt, the company’s debt is roughly 10 times the public trading price of its stock.
“Despite its high leverage, we believe WW will have no problem covering interest payments on its debt and ultimately expects to re-capitalize the company within two to three years after its clinical operations expand. “We believe we are in a much better position. Furthermore, we do not believe there is any concern that this year’s recapitalization or default is overstated,” Guggenheim analysts wrote.
Guggenheim has a buy rating on the stock and maintains a $12 price target. WW stock closed at $1.87 on Thursday.
Last year, WW acquired Sequence, which has since been rebranded as Weight Watchers Clinic. This was as a way to combat the threat of GLP-1 drugs to traditional business, with the ability to connect patients with clinicians who can prescribe and combine drugs. A more extensive weight loss program. The FDA requires this drug to be used in conjunction with a broader weight-loss diet and exercise regimen.
In a memo to employees, Sistani said the company’s GLP-1-related clinical business has grown rapidly since it reported on Feb. 28 and provided guidance for this year. “In fact, we are on track to exceed our first quarter guidance for clinic enrollment,” she wrote.
While accelerating growth in the clinical business is a positive, multiple analysts covering the stock told CNBC that given the relative size of the legacy business, there is a core need for investors to be bullish on the stock. He said the weight loss management business needs to grow. A new clinical approach.
One analyst who was consulted after the internal memo was shared said, “WW is in a difficult situation,” but could not comment on attribution due to concerns about fair disclosure of important information. “order [the clinicals business now named WeightWatchers Clinic] It should be the future. That’s the GLP-1 playbook, but it’s still very small at this point. It makes no sense if they are talking about the interests of the small business itself. The bigger problem is that traditional businesses continue to struggle and companies are overleveraged. ”
When WW reported its results on February 28, the company said it ended the fourth quarter with 3.8 million subscribers, of which 67,000 were clinical subscribers, but guidance for the full year 2024 said total subscriber growth was in the range of 3.8 million to 4 million. WeightWatchers Clinic has 140,000 to 160,000 subscribers.
”“Turning around and completely transforming your business is not for the faint of heart!” Sistani wrote in a letter to employees. If it continues, the stock price will take care of itself. I know the story of clickbait.” And although it is temporary, I feel that the impact on the market will not be large and can be predicted. But be proud, because we will prove the naysayers wrong. ”
In May of this year, Oprah Winfrey announced her intention to step down from the WW board and donate all of her stock to the National Museum of African American History and Culture. He said he will continue to work with the company to eliminate the problem. Weight Loss as Chronic Disease Management (Oprah Said) people She started using weight loss drugs in December). Next Monday, Winfrey will appear on ABC’s national prime-time weight loss special.
“We would not be surprised if this feature included positive commentary on the combination of clinically guided behavior modification programs and GLP-1 drug therapy,” Guggenheim said in a memo Thursday. He pointed out that WW was among the companies in the weight loss industry involved in the TV event.
Sistani was named to the inaugural CNBC Changemakers list, revealed in February.
[ad_2]
Source link
