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Planet Fitness (PLNT) Benefits From Robust Member Addition

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Planet Fitness, Inc. (PLNT - Free Report) is benefiting from a rise in membership sign-ups, strategic partnerships and international expansion. However, COVID-related concerns and inflation woes remain. Shares of the company have declined 13.6% in the past year compared with the industry’s decrease of 41.7%. Let’s delve deeper.

Growth Drivers

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 also initiated a series of new workouts with minimal to no equipment, thereby making it available to everyone exclusively on the Planet Fitness App.

This Zacks Rank #3 (Hold) company is gaining from new member additions. During second-quarter 2022, the company added 300,000 net new members, ending the quarter with 16.5 million. During the second quarter, the company’s store base increased to more than 2,300 locations with the addition of 34 new stores. Since the beginning of 2020, the company has added more than 330 new locations. For the rest of 2022, the company expects regularized joining trends and seasonality to continue.

Planet Fitness is one of the largest and fastest-growing franchisors as well as operators of fitness centers in the United States. To boost its presence in Mexico, the company announced a joint venture made up of a prominent local retail services company and one of its largest U.S. developers. The agreement is set for the development of 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 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 on the back of changing market dynamics along with tailwinds related to health and wellness, the company remains optimistic for a 4,000-plus domestic store opportunity over the long term. As of Mar 31, 2022, the company had approximately 16.2 million members as well as 2,291 stores in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia.

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Concerns

The coronavirus pandemic has affected the company’s business on a large scale. During the second quarter, the company said that its systemwide stores were 6% below pre-COVID membership levels. Due to the pandemic in China, the HVAC supply shortage is hurting the company. On the other hand, recession and inflation concerns remain a potent headwind.

Key Picks

Some better-ranked stocks in the Consumer Discretionary sector are Hyatt Hotels Corporation (H - Free Report) , Playa Hotels & Resorts N.V. (PLYA - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) .

Hyatt currently carries a Zacks Rank #2 (Buy). H stock has increased 36.1% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates growth of 78.1% and 93.9%, respectively, from the year-ago period’s reported levels.

Playa Hotels & Resorts currently carries a Zacks Rank #2. PLYA stock has decreased 10% in the past year.

The Zacks Consensus Estimate for PLYA’s current financial year sales and EPS indicates growth of 54.7% and 204.2%, respectively, from the year-ago period’s reported levels.

Choice Hotels carries a Zacks Rank #2, at present. CHH has a trailing four-quarter earnings surprise of 20.4%, on average. The stock has increased 6.4% in the past year.

The Zacks Consensus Estimate for CHH’s current financial year sales and EPS indicates growth of 13.6% and 17.7%, respectively, from the year-ago period’s reported levels.

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