Analyst Ratings Coverage
STA Research (RANK#26) issued a research report on Tuesday October 3rd, assigning the company with a “Speculative Buy” rating.
WE Stock Analysis & Forecast
As of the most recent analysis, the average analyst target price for WeWork Inc is a mere USD 0.50 over the next 12 months. This suggests that the consensus among analysts is decidedly bearish, as this target price is significantly lower than the last closing price of USD 2.95. In other words, analysts anticipate a substantial decline in WeWork’s stock value in the coming year.
The average analyst rating for WeWork Inc is categorized as “Buy,” which may seem contradictory given the very low target price. This rating could reflect a perception among some analysts that the stock is currently undervalued and might represent a buying opportunity if certain positive developments occur. However, it is essential to note that this “Buy” rating does not seem to be the dominant sentiment, considering the very bearish overall analysis.
Stock Target Advisor, an independent analysis provider, has expressed an extremely bearish outlook for WeWork Inc, based on its assessment of the stock’s signals. According to their analysis, there are 0 positive signals and 6 negative signals associated with WeWork’s stock. This strongly pessimistic view suggests that there are numerous concerning factors and red flags affecting the company’s outlook.
The recent performance of WeWork Inc’s stock is characterized by extreme volatility. Over the past week, the stock price has increased by a modest 1.03%, which may be seen as a minor positive sign in the short term. However, the more significant trend is apparent when looking at the past month and year. Over the past month, WeWork’s stock price has skyrocketed by a staggering 2,581.82%. This extraordinary surge might be due to speculative trading, short-term market dynamics, or specific news events.
However, over the past year, WeWork Inc’s stock price has experienced a jaw-dropping decline of -97.22%. This indicates a long-term trend of severe value erosion and significant challenges facing the company, which have likely contributed to the extremely bearish sentiment among analysts and investors.
WeWork Inc., the once-heralded poster child of the flexible workspace revolution, finds itself at a crucial crossroads. On Monday, the company announced its decision to withhold interest payments of approximately $95 million related to some of its notes. This move is part of WeWork’s ongoing efforts to improve its capital structure, a journey fraught with challenges since its failed attempt to go public in 2019. With SoftBank’s backing, the company is now grappling with a tarnished reputation, investor skepticism, and a need for reinvention.
The 2019 Debacle
In 2019, WeWork was poised for an initial public offering (IPO) that would have valued the company at an astronomical $47 billion. However, what was supposed to be a historic moment in the corporate world quickly unraveled. The IPO plans fell apart amidst growing concerns over WeWork’s substantial financial losses and doubts about the sustainability of its business model. The core of the problem was WeWork’s strategy of signing long-term leases on commercial real estate properties and then renting them out on shorter-term agreements.
Investors, previously enamored with the idea of WeWork’s global expansion, began to question whether the company could ever turn a profit. The prospect of losing money on long-term leases while competing in a market where short-term flexibility was the name of the game raised red flags.
The Impact of SoftBank
WeWork’s journey through the storm was made possible, to some extent, by SoftBank’s unwavering support. SoftBank had initially invested billions into the company, even offering a bailout package after the IPO disaster. This backing allowed WeWork to continue its operations, albeit on a more modest scale.
The Interest Payment Decision
WeWork’s decision to withhold interest payments on its notes is the latest chapter in its quest for financial stability. The company believes that by suspending these payments, it can allocate more resources toward reshaping its operations and ultimately ensure its long-term viability. WeWork’s choice to withhold payments is well within its rights, as it falls within a 30-day grace period stipulated in its agreement before a non-payment can be considered an “event of default.”
Crucially, WeWork has the liquidity required to make the interest payments. However, the company has opted to withhold them, perhaps signaling a strategic shift in prioritizing its financial health over immediate obligations. WeWork has also mentioned that it may decide to pay these obligations “in the future,” indicating a degree of flexibility in managing its financial commitments.
The Path Forward
WeWork’s journey ahead is fraught with challenges. The flexible workspace industry has evolved since its early days, with increased competition from both established players and new entrants. The COVID-19 pandemic has reshaped the way people view office work, further emphasizing the need for adaptability and hybrid work solutions.
To regain investor confidence and chart a sustainable path forward, WeWork must reevaluate its business model, potentially divest from long-term leases, and focus on innovative workspace solutions that cater to the evolving needs of businesses and individuals. This may involve a more modest approach to growth, focusing on profitability over expansion at all costs.