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Planet Fitness (PLNT) Strong on Strategies: Should You Retain?
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Planet Fitness, Inc. (PLNT - Free Report) will likely benefit from marketing initiatives, Black Card membership and store expansions. This and focus on digital initiatives bode well. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Drivers
Planet Fitness 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. The agency will look after the company’s creative and media placement for its annual New Year's sale. In sync with the advertising strategy (covering national and local levels), the transition paves the path for lower media costs and solid member acquisition. Apart from attracting new members to its brand, engaging existing members via its mobile app is a priority. The company intends to achieve this by focusing on driving downloads, app usage and enhanced functionality such as referral incentives, in-app messaging, notifications and improved account management tools. Features such as upgrades from the classic white card membership to the black card are an opportunity to drive rates.
Emphasis on Black Card member penetration bodes well. In summer 2021, the company launched a Black Card pricing test in 100 stores. Despite a price increase, the company delivered positive outcomes across key metrics such as acquisition rates, retention, average monthly dues per member and margin. Backed by the strong performance, the company initiated the rollout of new Black Card membership in May 2022 (at $24.99), covering additional 400 plus stores and access to premium digital content via the PF+ platform. Given the solid offerings, the company remains optimistic about the untapped opportunities for its brand in the United States.
Planet Fitness is focused on strategic partnerships and international expansions to drive growth. To boost its presence in Mexico, the company announced a joint venture of a prominent local retail services company and one of its largest U.S. developers. The agreement is set for developing a minimum of 80 new stores over the next five years. During the first quarter of 2022, the company opened a store in Mexico under a development agreement. Meanwhile, the company emphasizes expanding its reach outside of the United States. To this end, the company announced an agreement to open a Planet Fitness branch in New Zealand. Through this initiative, it expects to open 25 locations over the next several years. Given the growth potential of changing market dynamics and tailwinds related to health and wellness, the company is optimistic about a 4,000-plus domestic store opportunity over the long term.
For 2022, the company expects revenues to increase in the mid-50% range over 2021 levels. Adjusted EBITDA for 2022 is estimated to increase in the high-50% range, while adjusted net income is anticipated at the low-90% range over 2021 levels. The company expects adjusted EPS to increase in the mid-80% range over 2021 levels. The metrics are based on the assumption of potential impact from the Sunshine Fitness acquisition and that there is no significant worsening of the COVID-19 pandemic that seriously impacts performance.
In the past year, shares of Planet Fitness have declined 2.8% compared with the industry’s fall of 44%.
Image Source: Zacks Investment Research
Concerns
The coronavirus crisis 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.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation , Caleres, Inc. (CAL - Free Report) and MGM Resorts International (MGM - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 44.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Caleres sports a Zacks Rank #1. CAL has a trailing four-quarter earnings surprise of 62.9%, on average. Shares of the company have declined 2.1% in the past year.
The Zacks Consensus Estimate for CAL’s current financial year sales and EPS suggests growth of 4.8% and 0.7%, respectively, from the year-ago period’s levels.
MGM Resorts sports a Zacks Rank #1. MGM has a trailing four-quarter earnings surprise of 212.5%, on average. Shares of the company have declined 31.6% in the past year.
The Zacks Consensus Estimate for MGM’s current financial year sales and EPS suggests growth of 28.1% and 240.3%, respectively, from the year-ago period’s reported levels.
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Planet Fitness (PLNT) Strong on Strategies: Should You Retain?
Planet Fitness, Inc. (PLNT - Free Report) will likely benefit from marketing initiatives, Black Card membership and store expansions. This and focus on digital initiatives bode well. However, a decline in traffic from pre-pandemic levels is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Drivers
Planet Fitness 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. The agency will look after the company’s creative and media placement for its annual New Year's sale. In sync with the advertising strategy (covering national and local levels), the transition paves the path for lower media costs and solid member acquisition. Apart from attracting new members to its brand, engaging existing members via its mobile app is a priority. The company intends to achieve this by focusing on driving downloads, app usage and enhanced functionality such as referral incentives, in-app messaging, notifications and improved account management tools. Features such as upgrades from the classic white card membership to the black card are an opportunity to drive rates.
Emphasis on Black Card member penetration bodes well. In summer 2021, the company launched a Black Card pricing test in 100 stores. Despite a price increase, the company delivered positive outcomes across key metrics such as acquisition rates, retention, average monthly dues per member and margin. Backed by the strong performance, the company initiated the rollout of new Black Card membership in May 2022 (at $24.99), covering additional 400 plus stores and access to premium digital content via the PF+ platform. Given the solid offerings, the company remains optimistic about the untapped opportunities for its brand in the United States.
Planet Fitness is focused on strategic partnerships and international expansions to drive growth. To boost its presence in Mexico, the company announced a joint venture of a prominent local retail services company and one of its largest U.S. developers. The agreement is set for developing a minimum of 80 new stores over the next five years. During the first quarter of 2022, the company opened a store in Mexico under a development agreement. Meanwhile, the company emphasizes expanding its reach outside of the United States. To this end, the company announced an agreement to open a Planet Fitness branch in New Zealand. Through this initiative, it expects to open 25 locations over the next several years. Given the growth potential of changing market dynamics and tailwinds related to health and wellness, the company is optimistic about a 4,000-plus domestic store opportunity over the long term.
For 2022, the company expects revenues to increase in the mid-50% range over 2021 levels. Adjusted EBITDA for 2022 is estimated to increase in the high-50% range, while adjusted net income is anticipated at the low-90% range over 2021 levels. The company expects adjusted EPS to increase in the mid-80% range over 2021 levels. The metrics are based on the assumption of potential impact from the Sunshine Fitness acquisition and that there is no significant worsening of the COVID-19 pandemic that seriously impacts performance.
In the past year, shares of Planet Fitness have declined 2.8% compared with the industry’s fall of 44%.
Image Source: Zacks Investment Research
Concerns
The coronavirus crisis 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.
Zacks Rank & Stocks to Consider
Planet Fitness currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Bluegreen Vacations Holding Corporation , Caleres, Inc. (CAL - Free Report) and MGM Resorts International (MGM - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 85.9%, on average. The stock has increased 44.5% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and earnings per share (EPS) indicates growth of 11.2% and 35.1%, respectively, from the year-ago period’s reported levels.
Caleres sports a Zacks Rank #1. CAL has a trailing four-quarter earnings surprise of 62.9%, on average. Shares of the company have declined 2.1% in the past year.
The Zacks Consensus Estimate for CAL’s current financial year sales and EPS suggests growth of 4.8% and 0.7%, respectively, from the year-ago period’s levels.
MGM Resorts sports a Zacks Rank #1. MGM has a trailing four-quarter earnings surprise of 212.5%, on average. Shares of the company have declined 31.6% in the past year.
The Zacks Consensus Estimate for MGM’s current financial year sales and EPS suggests growth of 28.1% and 240.3%, respectively, from the year-ago period’s reported levels.