Planet Fitness (PLNT) Rises 13% in 6 Months: More Upside Left?

Planet Fitness, Inc. PLNT is poised to benefit from strategic partnerships, digitalization initiatives and reopening of stores. Moreover, focus on member acquisition through marketing initiatives bode well.

Shares of Planet Fitness have outperformed the industry in the past six months. The stock has gained 12.8% against the industry’s fall of 7.4%. An upward revision in earnings estimates for 2022 reflects analysts’ optimism in the company’s growth potential. In the past 30 days, the Zacks Consensus Estimate for 2022 earnings has moved up 4.9% to $1.71 per share.

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Growth Drivers

Strategic Initiatives: To expand its presence, Planet Fitness is focused on strategic partnerships and international expansions. The company collaborated with iFit, a leader in online streaming home workouts. With this partnership, the company also initiated a series of new workouts with minimal or no equipment, thereby making it available to everyone exclusively on the Planet Fitness App. The series would be available for members and non-members free of cost. Despite the coronavirus crisis, management stated that several private-equity-backed franchise groups expressed interest in further investments in the Planet Fitness brand.

The company continues to focus on its marketing muscle to drive growth. The company stated that it has transitioned from 16 marketing agencies to one (Publicis Groupe) to fuel incremental member growth. Consistent with the advertising strategy (covering national and local levels), the transition paves a path for lower media costs along with solid member acquisition. As of Sep 30, 2021, the company had more than 15 million members compared with 14.8 million members as of Jun 30, 2021.

Digital Efforts: Given the solid customer engagement in its fitness content, the company is currently testing a digital-only subscription membership for $5.99/month through its mobile app ‘PF plus’. Through this, the company intends to provide more premium content apart from free content. This includes live daily workouts, digital fitness classes (accessible through home and gym) and aggressive workout series to help customers advance over time. With this initiative, Planet Fitness is optimistic regarding the future conversion of non-members as well.

Reopening of Stores to Drive Growth: The company is benefiting from the reopening of stores. As of Sep 30, 2021, 2,189 stores have reopened. Of the total, 2,083 were franchisee-owned stores and 106 were corporate-owned stores. The company stated that the last group of reopenings is returning to pre-pandemic levels faster than stores that reopened in 2020. Given the growth potential on the back of changing market dynamics along with tailwinds related to health and wellness, the company is optimistic for a 4,000-plus domestic store opportunity over the long term.

Upbeat Views: The company raised its guidance for 2021. For 2021, the company expects revenues in the range of $570-$580 million, up from the prior estimate of $530-$540 million. Adjusted EBITDA for 2021 is estimated between $210-$220 million, up from the prior expectation of $200-$210 million range. Adjusted net income per share for 2021 is anticipated between 75 cents and 80 cents, up from the prior estimate of 65-70 cents. The metrics are based on the assumption that there is no worsening of the COVID-19 pandemic that might affect performance, like prolonged store closures or other mandated operational restrictions.

Zacks Rank & Other Key Picks

Planet Fitness currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks from the Zacks Consumer Discretionary sector include Guess', Inc. GES, Crocs, Inc. CROX and RCI Hospitality Holdings, Inc. RICK.

Guess sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 97%, on average. Shares of Guess have increased 8.4% in the past three months.

The Zacks Consensus Estimate for GES’s 2022 sales and EPS suggests growth of 38.6% and 4,342.9%, respectively, from the year-ago period’s levels.

Crocs flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 41.6%, on average. Shares of Crocs have increased 53.9% in the past year.

The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 48.8% and 25.8%, respectively, from the year-ago period’s levels.

RCI Hospitality sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 67.7%, on average. Shares of RCI Hospitality have surged 82.9% in the past year.

The Zacks Consensus Estimate for RICK’s 2022 sales and EPS suggests growth of 34.9% and 22.1%, respectively, from the year-ago period’s levels.

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