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Here's Why Investors Should Retain Planet Fitness (PLNT) Stock

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Planet Fitness, Inc. (PLNT - Free Report) is benefiting from the reopening of stores, rise in membership sign-ups, strategic partnerships and international expansion. Focus on digitalization initiatives also bodes well. Consequently, the company’s shares have gained 9% in the past six months, against the industry’s decline of 24.1%. Let’s delve deeper.

Growth Drivers

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 are returning to pre-pandemic levels faster than stores that reopened in 2020. Meanwhile, Planet Fitness anticipates new store openings for 2021 in the range of 110-120, up from the prior expectation of 75-100.

In an effort to expand its presence, Planet Fitness has been focusing on strategic partnerships and international expansions. The company collaborated with iFit, a leader in online streaming home workouts. With this partnership, the company initiated a series of new workouts with minimal or no equipment, thereby making it available to everyone on the Planet Fitness App. It will be available for both members and non-members free of cost. Despite the coronavirus crisis, management informed that several private-equity-backed franchise groups have expressed interest in further investments in the Planet Fitness brand.

The company is gaining from a rise in membership levels and positive system-wide same-store sales growth. As of Sep 30, 2021, the company had approximately 15 million members as well as 2,193 stores in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia.

Given 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 the 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. Markedly, with this initiative, Planet Fitness is optimistic regarding the future conversion of non-members as well.

The Zacks Rank #3 (Hold) company raised its guidance for 2021. For 2021, the company expects revenues to be $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 expected between 75 cents and 80 cents, up from the prior estimate of 65-70 cents.

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Concerns

The coronavirus pandemic has affected the company’s business on a wide scale. Although the company has implemented enhanced sanitation measures and social-distancing protocols upon reopening, traffic is still below pre-pandemic levels. A slowdown in new store developments and remodels, and lower replacement equipment sales due to the pandemic remain concerns.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector include Churchill Downs Incorporated (CHDN - Free Report) , Bluegreen Vacations Holding Corporation (BVH - Free Report) and Camping World Holdings, Inc. (CWH - Free Report) .

Churchill Downs sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 13.7%, on average. Shares of the company have gained 13.5% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Churchill Downs’ current financial year sales and earnings per share suggests growth of 51.4% and 684.3%, respectively, from the year-ago period.

Bluegreen Vacations flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 695%, on average. Shares of the company have surged 28.4% in the past three months.

The Zacks Consensus Estimate for Bluegreen Vacations current financial year sales and earnings per share indicates growth of 27.5% and 199.3%, respectively, from the year-ago period.

Camping World carries a Zacks Rank #2 (Buy). The company has been benefiting from the launch of a new peer-to-peer RV rental marketplace and a mobile service marketplace. It has been investing heavily in product development.

Camping World has a trailing four-quarter earnings surprise of 70.9%, on average. Shares of the company have appreciated 3.8% in the past three months. The Zacks Consensus Estimate for CWH’s current financial year sales and earnings per share suggests growth of 25.9% and 77.6%, respectively, from the year-ago period.