Sport-changing anti-obesity drugs have posed nothing wanting an existential disaster for Weight Watchers mother or father WW Worldwide since they arrived on the scene, however CEO Sima Sistani has been confronting this problem head-on. Regardless of an 11% dive within the inventory Friday, Morgan Stanley mentioned it thinks the corporate “has gone by way of an unimaginable transformation over the previous 12 months,” and named the inventory its high decide amongst small- and mid-cap web shares. “Sequence has rapidly and profitably turn into one of many high gamers within the GLP-1 telehealth area whereas flipping WW’s GLP-1 bear case to a bull case,” analyst Lauren Schenk wrote in a analysis notice Friday, referring to a telehealth platform WW agreed to purchase in March. Sequence offers subscribers entry to GLP-1 drugs similar to Novo Nordisk’s Wegovy and Ozempic. “With all eyes on the FDA upcoming motion for [ Eli Lilly ‘s] Mounjaro/tirzepatide weight problems label enlargement (anticipated by [year-end]), there are catalysts that would unlock provide and assist Sequence monetize the present demand,” Schenk wrote. On Thursday, WW reported a deeper-than-expected decline in third-quarter income , and warned its annual gross sales would probably fall to the low-end of its forecasted vary. Schenk mentioned the priority in regards to the drop in WW’s common income per consumer “appears overblown” and has created a shopping for alternative for the inventory. WW shares are up almost 90% for the reason that begin of the 12 months, however have dropped greater than 30% over the previous month. Schenk’s $13 worth goal implies the inventory might rally 78% from Friday’s shut. “We consider the lifetime worth of [subscribers] acquired in 3Q was in line to higher than expectations, however the cadence of recognizing that worth is barely longer,” she mentioned. Stabilizing core enterprise WW has been targeted on stabilizing its core weight reduction enterprise. It’s closing down its low-margin client merchandise enterprise, which offered snack bars, recipe books and different merchandise. Additionally, in the course of the newest quarter, extra members took benefit of decrease value long-term memberships, which harm income. Schenk mentioned these steps are making the corporate’s advertising and marketing spending extra environment friendly, which can assist earnings. In the meantime, WW is working to develop Sequence after closing on the deal in April . On the finish of the third quarter, it had 45,000 scientific subscribers. There was big curiosity in Novo and Lilly’s new class of appetite-suppressing weight reduction medicine, which have confirmed to assist sufferers shed kilos extra rapidly and simply. Nonetheless, entry to those medicine has been strained by a number of components, together with their excessive value and restricted provide. WW YTD mountain WW shares in 2023 Schenk mentioned she was inspired by the expansion of Sequence subscribers regardless of the bottlenecks and thinks it bodes nicely for development acceleration as shortages subside. This week, Lilly mentioned it anticipated the Meals and Drug Administration remained on observe to approve tirzepatide for weight problems by the tip of the 12 months. The corporate has been working aggressively to bulk up its manufacturing capability , having seen the problems Novo Nordisk has had retaining its GLP-1 drugs in inventory. Since Could, Novo has been limiting gross sales of the decrease beginning doses of Wegovy to make sure that sufferers already taking the drug have the provision they should proceed their therapy. Individually, Novo mentioned this week it has been gaining floor in convincing insurance coverage firms to cowl the drug , which has a listing worth of round $1,350 monthly. Each developments are a constructive for WW’s Sequence enterprise. Schenk estimates that round 6 million present or lapsed WW subscribers would qualify for therapy with weight problems remedy.