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Here's Why You Should Retain Planet Fitness (PLNT) Stock
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Planet Fitness, Inc. (PLNT - Free Report) is likely to benefit from store expansions, marketing efforts and membership growth. This and the emphasis on digital initiatives bode well. However, inflationary pressures are a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Drivers
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 with 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. The company emphasizes expanding its reach outside of the United States. PLNT announced an agreement to open a Planet Fitness branch in New Zealand. Through this initiative, it expects to open 25 locations over the next years. As of Mar 31, 2023, the company had commitments to open more than 1,000 new stores under its existing area development agreements. 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.
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. Consistent with the advertising strategy (covering national and local levels), the transition paves the path for lower media costs along with solid member acquisition. Apart from attracting new members to its brand, engaging existing members via its mobile app is a priority. PLNT intends to achieve this by driving downloads, app usage and enhanced functionality such as referral incentives, in-app messaging, notifications and improved account management tools.
During the first quarter of 2023, the company reported solid membership conversions on the back of its marketing and promotional offers. Also, it stated to have outpaced 2019 levels. During the quarter, membership levels came in at 18.1 million compared with 16.6 million in the previous quarter. Going forward, the company expects regularized joining trends and seasonality to continue.
For 2023, the company expects revenues to increase in the 13%-14% range, year over year. Adjusted EBITDA for 2023 is estimated to rise in the range of 17%-18%, year over year. Adjusted net income is anticipated to rise 30-33% compared with 2022 results. The company anticipates adjusted EPS to increase in the 33%-36% range year over year. The metrics are based on the assumption that there is no significant impact of the COVID-19 pandemic on membership counts and no potential supply chain disruptions.
Concerns
Image Source: Zacks Investment Research
In the past year, shares of Planet Fitness have declined 7.6% compared with the industry’s fall of 4.6%. The downside was primarily caused by inflationary pressures. During the first quarter of 2023, the company’s total operating costs and expenses came in at $170.1 million compared with $138 million reported in the prior-year quarter. The company is cautious of increased cost of construction and interest rates. For 2023, our model predicts total operating costs to rise 13.6% year over year.
Zacks Rank & Stocks to Consider
Planet Fitness currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 48.3% and 160.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 153.1%, on average. Shares of TCOM have increased 44.1% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 76.9% and 334.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations Holding Corporation carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.7%, on average. Shares of BVH have increased 3.5% in the past year.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates a rise of 3.6% and 17.6%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Planet Fitness (PLNT) Stock
Planet Fitness, Inc. (PLNT - Free Report) is likely to benefit from store expansions, marketing efforts and membership growth. This and the emphasis on digital initiatives bode well. However, inflationary pressures are a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
Growth Drivers
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 with 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. The company emphasizes expanding its reach outside of the United States. PLNT announced an agreement to open a Planet Fitness branch in New Zealand. Through this initiative, it expects to open 25 locations over the next years. As of Mar 31, 2023, the company had commitments to open more than 1,000 new stores under its existing area development agreements. 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.
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. Consistent with the advertising strategy (covering national and local levels), the transition paves the path for lower media costs along with solid member acquisition. Apart from attracting new members to its brand, engaging existing members via its mobile app is a priority. PLNT intends to achieve this by driving downloads, app usage and enhanced functionality such as referral incentives, in-app messaging, notifications and improved account management tools.
During the first quarter of 2023, the company reported solid membership conversions on the back of its marketing and promotional offers. Also, it stated to have outpaced 2019 levels. During the quarter, membership levels came in at 18.1 million compared with 16.6 million in the previous quarter. Going forward, the company expects regularized joining trends and seasonality to continue.
For 2023, the company expects revenues to increase in the 13%-14% range, year over year. Adjusted EBITDA for 2023 is estimated to rise in the range of 17%-18%, year over year. Adjusted net income is anticipated to rise 30-33% compared with 2022 results. The company anticipates adjusted EPS to increase in the 33%-36% range year over year. The metrics are based on the assumption that there is no significant impact of the COVID-19 pandemic on membership counts and no potential supply chain disruptions.
Concerns
Image Source: Zacks Investment Research
In the past year, shares of Planet Fitness have declined 7.6% compared with the industry’s fall of 4.6%. The downside was primarily caused by inflationary pressures. During the first quarter of 2023, the company’s total operating costs and expenses came in at $170.1 million compared with $138 million reported in the prior-year quarter. The company is cautious of increased cost of construction and interest rates. For 2023, our model predicts total operating costs to rise 13.6% year over year.
Zacks Rank & Stocks to Consider
Planet Fitness currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Consumer Discretionary sector are:
Royal Caribbean Cruises Ltd. (RCL - Free Report) carries a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 26.4%, on average. Shares of RCL have gained 44.4 in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates a rise of 48.3% and 160.5%, respectively, from the year-ago period’s levels.
Trip.com Group Limited (TCOM - Free Report) carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 153.1%, on average. Shares of TCOM have increased 44.1% in the past year.
The Zacks Consensus Estimate for TCOM’s 2023 sales and EPS indicates a rise of 76.9% and 334.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations Holding Corporation carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 24.7%, on average. Shares of BVH have increased 3.5% in the past year.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates a rise of 3.6% and 17.6%, respectively, from the year-ago period’s levels.