New Affiliate Model And Retail Channels Will Expand Market Presence

Key Takeaways

• Beachbody's shift to an affiliate model and retail expansion broadens market reach and unlocks new revenue opportunities through direct-to-consumer channels.
  
• New product launches under recognized brands and innovative partnerships aim to bolster sales, enhance retention, and capture health and wellness trends.
  
• Transition from MLM to omnichannel has led to revenue decline, challenges in scaling new sales channels, and potential volatility in financial projections.

Catalysts

Operates as a fitness and nutrition company in the United States and internationally.

• Beachbody's transition from a multilevel marketing (MLM) platform to a single-level affiliate model is expected to broaden their market reach, allowing the company to tap into new distribution opportunities. This shift is likely to impact revenue growth positively as they can leverage more direct-to-consumer channels and retail distribution that were previously inaccessible.
  
• The introduction of new products under well-known brand names like P90X and Insanity expands the product portfolio and is expected to drive increased sales. These products, available in major retailers and through direct channels, should significantly enhance revenue over time.
  
• The company's expansion into retail platforms such as Amazon and Walmart.com and the introduction of a subscription model like Subscribe & Save aim to boost long-term customer retention and revenue. This retail expansion can broaden Beachbody's market reach and potentially stabilize and grow revenue streams.
  
• The launch of new programs and marketing strategies, such as the women's hormone health program Belle Vitale and expanding sales channels, are designed to attract new customers and affiliates. These initiatives are expected to bolster brand visibility and revenue growth as they tap into significant health and wellness trends.
  
• Beachbody's focus on leveraging partnerships, like those offering their products via HSA/FSA accounts and telehealth services, is likely to provide new customer engagement platforms, potentially enhancing cash flow and earnings by accessing an untapped segment of consumers interested in health and wellness expenditures.

Beachbody Company Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beachbody Company's revenue will decrease by 28.3% annually over the next 3 years.
• Analysts are not forecasting that Beachbody Company will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beachbody Company's profit margin will increase from -17.1% to the average US Consumer Services industry of 11.4% in 3 years.
• If Beachbody Company's profit margin were to converge on the industry average, you could expect earnings to reach $17.6 million (and earnings per share of $2.51) by about April 2028, up from $-71.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.3x on those 2028 earnings, up from -0.5x today. This future PE is lower than the current PE for the US Consumer Services industry at 18.5x.
• Analysts expect the number of shares outstanding to grow by 1.68% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.8%, as per the Simply Wall St company report.

Beachbody Company Future Earnings Per Share Growth

Risks

• The transition from a multilevel marketing model to an omnichannel approach has led to a decline in revenues and digital subscriber count, which could continue impacting overall revenue growth negatively in the short term.
  
• The company faces uncertainties and challenges with its new affiliate model, experiencing slower-than-expected growth in affiliate numbers, which may affect revenue streams reliant on affiliate sales.
  
• A significant revenue decline was observed in the Nutrition segment due to the transition away from MLM, with potential risks to future revenue if the company cannot effectively scale its new sales channels.
  
• The company's new business model still lacks historical data to accurately predict financial performance, suggesting potential volatility and uncertainty in revenue and earnings projections.
  
• Expenses related to restructuring, such as goodwill impairment charges and other operating costs, continue to impact net margins and may strain cash flow if not carefully managed in the new omnichannel strategy.

Valuation

• The analysts have a consensus price target of $10.667 for Beachbody Company based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $13.0, and the most bearish reporting a price target of just $7.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $154.1 million, earnings will come to $17.6 million, and it would be trading on a PE ratio of 5.3x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of $4.9, the analyst price target of $10.67 is 54.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.