Can WW International recover to pre-inflationary shock levels?

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WW Stocks International It’s currently trading at $7 a share, 80% below the pre-inflation shock high of $41, seen in December 2021, and has some upside potential. WW saw its stock trade at $6.40 in late June 2022, before the Fed started raising interest rates, and is now 10% above those levels, which is a poor performance in the broader markets, considering that the S&P 500 rose by approximately 18% during this period. The difficult performance in WW International shares over the recent past can be attributed to the company’s declining subscriber base, particularly for the digital business, as demand cools after Covid-19. Moreover, WW is also facing increasing competition from the wave of new age apps as well as social media influencers.

Returning to the pre-inflationary shock level means WW International shares should gain more than 5x from here. However, we don’t think that will happen anytime soon and estimated WW International Assessment That would be about $9 a share, which would mean a 30% gain. While we expect the company to benefit from its acquisition of digital health company Sequence, which offers a subscription service for telehealth consultations with doctors who can prescribe appetite-suppressing medications such as Ozempic, there are risks from an uncertain economy and slowing consumer spending. Moreover, WW’s relatively high debt load remains a limiting factor to the upside. Our detailed analysis of WW International Post-Inflationary Shock It reflects the trends in the company’s stock during the turbulent market conditions we witnessed during 2022. It compares these trends to the stock’s performance during the 2008 recession.

Inflation shock in 2022

Timeline of the inflation shock so far:

  • 2020 – early 2021: An increase in the money supply to mitigate the impact of lockdowns has led to higher demand for commodities; Producers are unable to match.
  • Early 2021: The shipping crisis and worker shortages due to the coronavirus pandemic continue to hurt supplies.
  • April 2021: Inflation rates exceed 4% and are rising rapidly.
  • Early 2022: Higher energy and food prices due to the Russian invasion of Ukraine. The Federal Reserve begins the process of raising interest rates.
  • June 2022: Inflation levels peak at 9% – the highest level in 40 years. The S&P 500 is down more than 20% from its peak levels.
  • July – September 2022: The Fed aggressively raises interest rates – leading to an initial rebound in the S&P 500 followed by another sharp decline.
  • Since October 2022: The Fed continues the process of raising interest rates; Improved market sentiment is helping the S&P500 recover some of its losses.

In turn, here’s how WW stocks and the broader market performed during the 2007/2008 crisis.

2007-08 crisis timeline

  • 10/1/2007: Approximate pre-crisis peak in the S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated Market Drop Corresponds to Lehman’s Bankruptcy Filing (9/15/08)
  • 3/1/2009: The rough bottom of the S&P 500
  • 31/12/2009: Initial recovery to levels before the accelerated decline (around 9/1/2008)

Performance of the WW and S&P 500 during the 2007-2008 crisis

WW International stock fell from $57 in September 2007 (the pre-crisis peak) to around $18 in March 2009 (as the markets bottomed out), indicating that the stock lost approximately 68% of its pre-crisis value. It recovered after the 2008 crisis to levels around $29 in early 2010, and rose about 61% between March 2009 and January 2010. The S&P 500 saw a 51% decline, falling from 1540 levels in September 2007 to 757 in March 2009 and then It increased by 48% between March 2009 and January 2010, reaching 1,124 levels.

Fundamentals of WW International through recent years

WW International’s revenue has declined steadily from about $1.4 billion in 2019 to about $1.2 billion in 2021, as the company has seen its physical centers hit by the Covid-19 pandemic, though this is partially offset by growth in the digital business. However, the digital business has been experiencing headwinds recently, with the company’s total revenue dropping to just about $1 billion through 2022. WW also went from earning about $1.78 per share in 2019 to posting a net loss of over $3.50 per share. one in 2022, due to a slowdown in demand.

Does WW have a sufficient cash cushion to meet its obligations through the ongoing inflationary shock?

Total world war debt has remained roughly steady at levels of about $1.4 billion over the past four years. The company generated $75 million in cash flow from operations in 2022, with a total cash position of approximately $141 million as of the most recent quarter. This may mean that the company’s financial position can be somewhat constrained in a high interest rate environment.

Conclusion

With the Fed’s efforts to tame runaway inflation helping market sentiment, we think WW stock has the potential for some gains once fears of a potential recession subside. Also, the company’s foray into medical solutions for weight loss could give the stock some lift. However, the company’s high debt load as well as its declining subscriber base present challenges.

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