Weight Watchers' Brand Has Come a Long Way
About the only concern we having coming out of the quarter is valuation.
We believe investors should walk away from
About the only concern we having coming out of the quarter is valuation. On the surface, the market price/earnings multiple of 23 times our preliminary 2019 EPS outlook around $4.00 (which includes a $0.50 tailwind from new subscribers in the base) appears reasonable given the platform's increased optionality. We plan to raise our fair value estimate to $65 based new monetization opportunities, but we believe the company would need to post average annual revenue growth in the midteens and operating margins in the high 30s to justify the current market price. This isn't impossible--and we don't see many downside catalysis on the horizon--but still difficult in what is a rapidly evolving industry with nascent sources of competition, the rationale for our no-moat rating.
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