'A Punch to the Gut': WW International (WW) Crashes 25% on Disappointing Q2 and Guidance, Jefferies Downgrades to 'Hold'
Shares of WW International (NASDAQ: WW) have opened 25% lower Wednesday after the fitness and weight-loss company reported mixed Q2 earnings.
Revenue for the quarter came in at $311.5 million, lower than $333.6 million reported a year ago and below $337.1 million expected from surveyed market analysts. Net income was reported at $0.12 per share, a massive miss compared to the $0.65 consensus and the $0.20 reported a year ago.
"We ended the quarter with 4.9 million subscribers, including 4.1 million Digital subscribers -- an all-time second quarter-end high and up 6% year-over-year, but below our expectations. The strong Digital year-over-year growth momentum in Q1 slowed in the second quarter as we cycled against strong Digital performance in 2020," said Mindy Grossman, the Company's President and CEO.
On the outlook, the company expects revenues to come at $1.3 billion and earnings of between $1.10 and $1.25 per share. Both metrics missed the consensus of $2.00 in earnings per share and revenues of $1.38 billion.
As a result, Jefferies analyst Stephanie Wissink downgraded to “Hold” from “Buy” to “reassess” the WW investment thesis. The price target is slashed to $30.00 per share from $41.00.
“We are pausing our thesis to reassess. Q2 member counts were in range, but the lowered outlook has shaken our confidence in rev cadence & near-term momentum. With guide for growth no longer supporting counter-seasonality, we pull back assumptions for members and push out our model by 12 months. Positives: GM% improved, cost tightening, and new food platform on deck. Q122 diet season is next shot on goal,” the analyst commented in a note.
Truist analyst Michael Swartz reiterated a “Hold” rating and cut the PT to $26.00 per share from $28.00 after Q2 results delivered a “punch to the gut.”
“We are lowering our '21/'22 estimates and PT following a surprising 2Q miss and disappointing '21 guidance. In our view, the softer N-T outlook in Digital will be the primary focal point for investors. We believe shares will remain in a holding pattern until there is greater comfort that (1) the 2Q sub decel was temporary and/or (2) WW's new food plan can drive earnings materially higher in '22,” Swartz wrote in a client note.