WW hits 52-week low after report on Ozempic hype house backlash

Shares of WW (WW), formerly Weight Watchers International, hit a 52-week low following a scathing report that said social media personalities were asked to promote a product they “never tried.” Additionally, analyst checks suggest that demand for WW’s legacy offering was “weak” during the post-New Year’s “Diet Season.”

GLP-1 HYPE HOUSE BACKFIRES: The GLP-1 hype house, a day-long marketing event for WW’s new prescription obesity drug service, involved enlisting influencers to “help bust the misconceptions and stigma around GLP-1 medications” such as Wegovy and Zepbound and to “share that WW is here to support you,” according to an email sent out to multiple potential partners viewed by Bloomberg, Madison Muller reported on Tuesday. However, the company faced backlash before the event posting began, including people who had  negative associations with the brand’s decades-long approach to food and dieting, with a few saying Weight Watchers’ points system led to their disordered eating, Muller wrote. The “Weight Watchers GLP-1 Program” launched in December.

Another issue was that WeightWatchers reportedly offered influencers money to post about “the GLP-1 Program,” a service meant to support people taking drugs like Wegovy and Zepbound, which some influencers had not tried. The contract also had a noncompete clause barring participants from working with other digital weight-loss brands like Calibrate and Noom, or with nutrition programs like Whole30 or the Paleo Diet during the campaign and for a week before and after, according to Bloomberg.

Weight Watchers declined to comment citing a quiet period before reporting earnings at the end of the month, Bloomberg added.

‘WEAK’ DEMAND: Craig-Hallum said that while the fourth quarterly is generally a major catalyst for WW, based on the firm’s checks, it appears that demand for WW’s legacy offering during the post-New Year’s “Diet Season” was weak, with significant year over year declines in app downloads, web traffic, and Google searches. The firm notes that this is a continuation of several
years of declining sales, but was likely exacerbated by consumer interest in GLP-1 weight
loss drugs.

While the firm is “intrigued” by the long-term potential of WW’s clinical offering, low insurance approval for GLP-1s and the lack of an affordable compounded alternative offered by WW could mean that demand for the new drugs will not translate to significant financial results in 2024.

Craig-Hallum maintained a Hold rating on the shares, but lowered its price target to $4 from $8. While WW has a more robust presence in medically supported weight loss following its $106M acquisition of Sequence, the risk to WW is that encouraging results and strong demand for its GLP-1 offering may not be enough to offset continued headwinds in its much larger traditional weight loss business, the firm argues.

PRICE ACTION: In morning trading, shares of WW are down 8% to $3.52. Shares are down nearly 60% year-to-date.