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Financially fit: A resolution to cash in

·5-min read
A mother and two daughters exercising in a park.
A new year and new investments can be a great fit. (Source: Getty)

What’s the first thing that comes to mind when you think of the new year?

Perhaps it’s going out and partying with friends and family? Maybe it’s a nice, relaxing holiday somewhere just after? Or maybe it’s the resolution to stop eating unhealthy foods and start exercising regularly, and this time you’re really going to stick to it?

If you answered the latter, you’re not alone. More than half (51 per cent) of Australia’s adult population are making the exact same resolution: pledging to either lose weight, exercise more, or simply eat healthier.

And as people continue to make these types of resolutions every year, the health and fitness companies are sitting idly, ready to capture these newly motivated individuals.

We don’t have to go far to find evidence of this, with all kinds of ‘new year, new you’ advertising slogans and half-price deals at gyms and supplement stores.

In fact, with the global fitness industry projected to grow by 171.75 per cent by 2028, there’s a lot of money to be made, and not just for those leading fitness businesses, but for investors, too.

Although 2022 will likely see the industry shift away from at-home workout solutions and back to gyms, the fad isn’t over. Far from it.

Riding with the Peloton

Despite a heavy drop in price following Mr Big’s Peloton-related incident on the new Sex and the City reboot, And Just Like That, Peloton’s future as an at-home fitness provider is looking bright.

For the uninitiated, Peloton (PTON) offers connected stationary bikes, treadmills, and general workout classes that allow people to take gym-quality classes at home with qualified trainers.

A composite image of the Peloton logo on a phone screen and actor Chris Noth as Mr Big.
Peloton shares took a dive after Mr Big had a heart attack post workout. (Source: Getty/HBO)

In its Q1 report released in November 2021, Peloton’s subscribers had increased 87 per cent year-over-year, but revenues started to slow, with Q1 revenue showing just 6 per cent growth at US$805 million.

Additionally, weak guidance for FY22 sent the stock plummeting. It’s now down a massive 72 per cent for the year to date. It’s this drop that has created an attractive entry price point for everyday investors.

Considering Peloton is one of the largest fitness providers in the world, and the online-digital fitness industry is projected to grow 33.1 per cent per year until 2028, Peloton has quite the head start in capturing customers, a lot of potential, and plenty of room to grow.

Garmin get it

Keeping with the theme of tech-enabled fitness, Garmin is another player with the potential to make waves in the space and, ideally, provide investors with decent returns.

Known previously for manufacturing GPS navigation devices, Garmin (GRMN) has pivoted to the burgeoning personal-fitness-device market, which sees the company manufacturing smart watches, fitness trackers, cycling power meters and heart rate monitors.

Some of its devices also provide data on blood oxygen levels, which has seen its range prove useful for monitoring the recovery of COVID-19 patients throughout the pandemic.

Because of this smart move, 2021 was its sixth consecutive year in which revenue increased, and analysts anticipate its growth won’t be stopping anytime soon.

This is due to Garmin’s leadership, focusing heavily on research and development, which should help it build resilience and continue to pivot with ever-changing times and technological fads.

Life gives you Lululemon

Finally, I want to touch on a company that is actively diversifying its fitness-focused offering across both apparel and at-home connected fitness, Lululemon (LULU).

Although the bulk of apparel retailers struggled to stay afloat during the pandemic, Lululemon didn’t. In fact, the company expanded its sales and gross margin significantly, and because of lockdowns, the bulk of this was achieved through its eCommerce platform.

Lululemon also managed to get its foot in the connected fitness door in 2020, acquiring Mirror, an at-home fitness company that delivers workouts through a mirror.

The device is subscription-based at US$40 per month, and while 2021 was spent strategising the best direction for Mirror to take, the consistent subscription revenue that will be made long-term is sure to help push the company towards a successful year.

Supply chain disruptions lasting through the early part of 2022 will be the major challenge for Lululemon to overcome, but industry experts predict these will ease.

If they do, Lululemon’s diversification and track record give the company strong potential to grow significantly and provide returns to investors in 2022 and beyond - more so than Peloton.

Although the 20s have been a wild ride so far in nearly every aspect, the resulting turbulence has also created new economic opportunities for everyday investors.

By keeping an eye on trends, like the upswing in people focusing on their fitness at this particular time every year and market conditions, savvy investors can get in early on stocks with major growth potential and, ideally, sail through 2022 with significant gains.

Josh Gilbert is a market analyst at eToro.

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