WeWork's Exit From Underperforming Locations Is A Step In The Right Direction, But More Needed, Analyst Says

WeWork's Exit From Underperforming Locations Is A Step In The Right Direction, But More Needed, Analyst Says
  • Mizuho analyst Vikram Malhotra reiterated a Buy on WeWork Inc WE with a $9 price target.
  • WeWork reported 3Q results, with a headline miss on revenue and EBITDA, but adjusted for FX was more in line
  • A key positive was the company's plans to exit underperforming locations, reducing the top line but improving profitability
  • In addition, WeWork extended the maturing of specific debt capacity by a year and extended its letter of credit (LC). 
  • Negatives include stalling the occupancy ramp and delaying its positive cash flow goal, which will require additional capital rises. 
  • Given these negatives, bears will be concerned near term and will focus on the need for more restructuring and strategic steps, given tech job losses. 
  • However, the core flex office business can keep outperforming versus core traditional Office, and there is room for additional cost reduction, both likely catalysts. 
  • He saw WeWork as an undervalued play on changing work patterns.
  • Price Action: WE shares traded higher by 9.04% at $2.83 on the last check Friday.
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