Goldman Sachs Thesis On Weight Watchers Is 'Absurd,' Fund Manager Says Why He'd Short The Stock

Shares of WW International Inc (NASDAQ:WW), the parent company of diet and fitness platform Weight Watchers, jumped almost 60% on Tuesday after a Goldman Sachs (NYSE:GS) analyst upgraded the stock and substantially raised its price target from $3.80 to $13.

The upgrade came after WW confirmed the purchase of Sequence, a telehealth provider that connects patients with doctors who can prescribe weight-loss drugs like Ozempic and Wegovy.

Yet one influential fund manager does not agree with Goldman Sachs.

Gary Black, managing partner of The Future Fund — the firm behind the Future Fund Active ETF (NYSE:FFND) — said that Goldman Sachs' thesis implied Weight Watchers members will pay Sequence $90 a month to get access to drugs such as Wegovy and Mounjaro, when the average member today pays a monthly $23.

"The flaw with the thesis: most insurance plans won't cover the cost of these drugs," wrote Black on Twitter.

Without insurance coverage, these drugs cost patients between $840 and 1,200 a month, says Black, and only 20% of insurers cover them for the clinically obese.

The fund manager said his firm would take a completely opposite stance, shorting WW stock, an action done when fund managers expect the price of a stock to decline over time.

Also Read: What Is Short Selling Stocks? A Beginner's Guide to Short Selling

Meanwhile, Goldman Sachs analyst Jason English said if WW can grab just 3% of the total addressable market for weight loss drugs in the U.S., it could add $2 in earnings per share.

Black called the WW rally a deja-vu. On March 7, WW stock climbed 70% in one day, to later quickly return to their original price.