Can WW International Stock Ride the GLP-1 Hype?

WW International, widely known for its WeightWatchers brand, has been rallying in recent weeks as it looks to benefit from offering GLP-1 weight-loss medications to its customers. But is that enough of a reason to buy this beaten-down stock, which is down around 90% so far this year?

High Short Interest Reflects Market Skepticism

With approximately 20% of WW International’s float sold short, market sentiment is heavily pessimistic on the weight loss company. A short interest at this level often reflects investor concerns about a company’s long-term viability, particularly regarding cash flow and growth sustainability. For WW, this high short interest is a signal of the widespread doubts among investors about its ability to successfully implement its new strategic initiatives.

As of the end of the June quarter, the company reported cash and cash equivalents of $42.7 million, which may not be enough to sustain its operations for long. In the trailing 12 months, the company has burned through more than $4.2 million from its operating cash. And its free cash flow was a negative $31 million. The risk for investors is if the company isn’t able to improve its financials soon, it may need to require on frequent stock offering just to keep its operations afloat.

GLP-1 may only be a short-term boost for the business

WW is hoping to cash in from surging demand for GLP-1, but that may not be a huge catalyst for the business for long. Novo Nordisk, a leading GLP-1 manufacturer, recently petitioned the FDA to restrict compounded versions of its GLP-1 medications, which would directly impact WW’s current plan to offer compounded semaglutide. Should the FDA side with Novo Nordisk, that could throw a big wrench into WW’s plans and limit any boost its top and bottom lines get from this recent move.

And even if that doesn’t happen, compounding pharmacies can only make copies of drugs while there are shortages of them. Once those shortages are addressed and there is sufficient demand in the market, it’s no longer permissible to make compounded version of popular drugs.

Is WW International a Buy?

While the potential market for GLP-1 weight-loss treatments is substantial, WW International isn’t necessarily in a great position to benefit from those opportunities. Furthermore, its current financial instability and high short interest make it a risky investment overall. This stock may appeal to speculative investors betting on a turnaround, but it may not suit value-oriented or conservative investors seeking a stable investment to hang on to for the long haul.