One of the reasons J.P. Morgan downgraded WW, formerly Weight Watchers International Inc., to neutral from overweight is because the diet club is losing market share to health-and-wellness app Noom, and the threatening startup is on the pricier end of subscription rivals.
J.P. Morgan said channel checks show that the New Year’s resolution enrollment period is off to a slow start, which could prevent WW from reaching its goal of $2 billion-plus in revenue by the end of 2020.
J.P. Morgan slashed its price target to $37 from $70.
About 80% of WW’s revenue growth is expected to come from membership and retention. WW WTW, +0.66% had 4.2 million subscribers as of the end of Q3 2018.
“We previously highlighted concerns that WW may be unable to reach their 2020 revenue target if consumers continued to aggressively shift towards using a digital-only subscription over the traditional digital + studio membership, which commands a high monthly fee,” wrote J.P. Morgan.
Noom is an app-based health-and-wellness company that creates personalized plans to help users lose weight, exercise and reach other goals that are popular during these early weeks of the year.
“While our analysis indicates broad traffic declines across WW’s historical competitive set including Nutrisystem, Jenny Craig, South Beach, etc. one notable company bucking the trend is called Noom,” J.P. Morgan said. “While this program is more expensive at $44.99 per month versus WW’s digital membership at $19.95 per month, the brand is gaining significant traction as per SimilarWeb data.”
On its website, Noom emphasizes the role that technology plays in making the pursuit of a healthier lifestyle more enjoyable. Executives in the health, wellness and fitness space say the same.