Jan. 16, 2019
J.P. Morgan analyst Christina Brathwaite recently downgraded WTW stock due to "channel check" that indicated falling interest in WW. She claims that traffic to the WW website is down year over year, spelling trouble for enrollments, and that the app Noom is providing competition.
Well, I have a problem with this assessment. It's far from complete and doesn't take into account all the ways that people find out about WW and sign up for its programs. Website traffic is not the only barometer. What about people that see a TV ad, or digital ad, or a direct mail flyer, or a recommendation via word of mouth, and go online or to a local meeting site and sign up? Did Ms. Brathwaite have data on this? In addition, website traffic may be down but it's really the CONVERSION rate that's more important. You can get better conversions on less traffic and that can override the decline. She also doesn't specify the time period that website traffic is down for. Furthermore, WW now has partnerships with Headspace, Class Pass, and Blue Apron. Did Ms. Brathwaite look at traffic to these partners' websites, and did she look at employer-based programs (a significant user of WW)? I suspect not. Therefore, this is a VERY incomplete assessment of interest and ultimately, sales.
As for Noom, yes it's more visible this year due to TV ads but when you look at online reviews of the company, there are lots of negative comments about them continuing to bill customers after they cancel their memberships. In addition, most analysts agree that diet and fitness app usage drops off a lot after 30 days, when dieters realize that an app alone is not enough support and they need in-person counseling..
Further, I tried to call Ms. Brathwaite at J.P. Morgan's NY headquarters, asking her specifically what "channels" she checked. She hung up on me. Not very forthcoming, or professional. If you are going to downgrade a company's stock, I think you owe it to investors and the public to specify who or what your sources are, not leave it for us to guess.
As such, I would take this analyst's recommendation with a big grain of salt and file it under fake or not useful news. As is typical in this sector, analysts of the weight loss market are only giving you 50% of the total picture. If an analyst doesn't adequately explain their methodology, call them on it!
Note: For accurate and comprehensive information and reports about the weight loss market, contact Marketdata LLC at: marketdataenterprises.com/diet-market-our-specialty