Morgan Stanley Analyst is Wrong About Weight Watchers Potential

Sept. 14, 2018

OK, here we go again. Another Wall St. analyst purporting to know more about the weight loss market than he does. This time it's Vicent Sinisi at Morgan Stanley, who claims that the addressable market for Weight Watchers is much smaller than analysts think. His thesis is that there are only 31 million Americans who represent good prospects for customers, and that the market is only worth $18 billion.

Now for the REAL facts: There were 249 million American adults in the country in 2016. 70% of them are obese or overweight. That's 174 million potential weight loss customers--not 31 million. Where Mr. Sinisi came up with 31 million I don't know but it's way off. In addition, when we add up the 2017 $ values of the various market segments, we get $59+ billion, not $18 billion. The segments: Diet soft drinks sales: $18.76 bill., health club industry revenues: $30.66 bill., commercial weight loss centers: $3.55 bill., low-cal diet foods: $1.9 bill., retail meal replacements/OTC diet pills (incl. MLM channels): $4.7 bill. We excluded all medical weight loss programs (worth another $7.66 bill.) since commercial firms such as Weight Watchers do not prescribe Rx diet drugs, or do surgery, and do not have MDs supervising people with medical conditions.

Yes, we DO include health club revenues as part of the market, because we feel that people join them not just for body building but to lose or maintain weight. In fact, many health clubs and gyms have dedicated weight loss programs and personal trainers, and sell various supplements and meal replacements. And yes, diet soft drinks are for people also trying to lose or maintain weight. Why else would you buy them?

The consensus price target for WTW is currently $106, so Mr. Sinisi is running against the tide. Oh, by the way, Mr. Sinisi only has a 1.5 star analyst ranking out of 5 stars, which measures accuracy of calls, among other criteria.

Bottom line: Be wary when an analyst's call or price target differs substantially from the consensus. Do some research. That analyst may just be trying to say something controversial, make a name for himself, or attempt to inject negativity into a stock in order to short it.  We at Marketdata believe that this may be the case with Morgan Stanley's latest article regarding Weight Watchers. Faced with the facts, Mr. Sinisi's argument just doesn't hold water.

Note: The above statistics and a lot more are available in Marketdata's best-selling report: "The U.S. Weight Loss & Diet Control Market", May 2017, 400+ pages(now on sale for $995, regular $1,895). See www.marketdataenterprises.com, or call:L 813-971-8080. John LaRosa holds frequent conference calls with analysts ($199 per hr.). Marketdata has separate weight loss market research studies for: medical weight loss programs, the meal replacements market, MLM diet products, and the meal kits delivery market.

 

 

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