Yahoo Finance Here's Why You Should Retain Planet Fitness (PLNT) Stock
Planet Fitness, Inc. PLNT will likely benefit from store expansions, strategic partnerships and marketing efforts. This and the emphasis on Sunshine Fitness acquisition bode well. However, supply chain issues and 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 several years. As of Sep 30, 2022, 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.
Increased focus on the acquisition of Sunshine Fitness bodes well. The company anticipates the acquisition to provide geographic diversity to its current corporate store portfolio and in markets with a long runway for future store development. With the acquisition closed, the company now owns more than 200 corporate stores for approximately 10% of the total system. Sunshine Fitness — which operates 114 locations in Alabama, Florida, Georgia, North Carolina and South Carolina — is likely to add to Planet Fitness' adjusted net income per share in the low double-digit percent range in 2022. The acquisition of 114 stores through the Sunshine Fitness buyout contributed $50.4 million to the corporate-owned stores segment’s revenues during the third quarter of 2022.
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. The agency will look after the company’s creative and media placement for its annual New Year's sale. Consistent with the advertising strategy (covering national and local levels), the transition paves the path for lower media costs along with solid member acquisition. During the third quarter of 2022, 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 16.6 million compared with 16.5 million in the previous quarter. For the rest of 2022, the company expects regularized joining trends and seasonality to continue.
For 2022, the company continues to expect revenues to increase in the high-50 percent range year over year, up from the previous projection of a mid-50 percent range. Adjusted EBITDA for 2022 is estimated to rise approximately 60% year over year compared with the previous expectation of a high-50 percent range. Adjusted net income is anticipated at the low-100% range (over the 2021 levels) compared with the previous expectation of a low-90% range. The company anticipates adjusted EPS to increase in the mid-90% range year over year compared with the previous projection of a mid-80% range. The metrics are based on the assumption of the potential impact of the Sunshine Fitness acquisition and that there is no significant impact of the COVID-19 pandemic.
In the past year, shares of Planet Fitness have declined 22% compared with the industry’s fall of 43.4%.
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Concerns
The coronavirus crisis has affected the company’s business on a wide scale. Due to the pandemic in China, the HVAC supply shortage is hurting the company. Owing to the supply chain issue, the company has decreased its outlook for equipment placements in franchisee-owned locations from approximately 170 to a range of 150-160. The pandemic-induced slowdown in new store developments and inflationary pressures are a concern.
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 Consumer Discretionary sector are Hyatt Hotels Corporation H, Crocs, Inc. CROX and Boyd Gaming Corporation BYD.
Hyatt currently carries a Zacks Rank #1. H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 9% in the past year.
The Zacks Consensus Estimate for H’s current financial year sales and EPS indicates a surge of 92.6% and 121.8%, respectively, from the year-ago period’s reported levels.
Crocs currently has a Zacks Rank #2 (Buy). CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 48.8% in the past year.
The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.
Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock has declined 4.5% in the past year.
The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.4% and 11.9%, respectively, from the year-ago period’s reported levels.
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