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Here's Why You Should Retain Planet Fitness (PLNT) Stock

Planet Fitness, Inc. PLNT will likely benefit from strategic partnerships and international expansion. Also, the emphasis on marketing and digitalization initiatives bodes well. However, an uncertain macroeconomic environment is a concern.

Let us delve into the factors that highlight why investors should retain the stock for now.

Growth Drivers

Strategic Efforts: PLNT has focused on strategic partnerships and global expansion to expand its presence. Its collaboration with iFit, a prominent provider of online home workouts, has introduced new equipment-free workouts exclusively on the Planet Fitness App, available to both members and non-members at no cost.

Despite the challenges posed by the coronavirus crisis, PLNT has attracted interest from private-equity-backed franchise groups looking to invest in the brand.

Marketing Initiatives: The company remains focused on strengthening its marketing efforts to drive growth. PLNT has shifted from working with 16 marketing agencies to partnering with a single agency, Publicis Groupe, to boost member growth. This agency will handle both creative work and media placement for the annual New Year's sale, aligning with the company's national and local advertising strategy. This transition is expected to reduce media costs while enhancing member acquisition efforts.

For the second quarter of 2023, the company reported solid membership conversions on the back of its marketing and promotional offers. During the quarter, membership levels grew by more than 300,000 and came in at more than 18.4 million compared with 16.5 million in the previous-year quarter. For the rest of 2023, the company expects regularized joining trends and seasonality to continue.

Digitalization to Drive Growth: PLNT focuses on engaging existing members through its mobile app, emphasizing increased downloads, usage, and added functionality like referral incentives, messaging, and notifications. Moreover, features such as upgrades from classic white card membership to the black card are an opportunity to drive the rate. The app's referral feature amplifies word-of-mouth marketing. The company also plans to use its large membership base of 17 million to enhance brand awareness.

The company is witnessing strong traffic on its digital platform, driven by existing and new members, especially for iFit content. To capitalize on this, the company acquired a minority stake in iFIT Health & Fitness in the first quarter of 2021. This move allows Planet Fitness to expand its digital content offerings, including mind and body wellness categories. Additionally, PLNT's United We Move workouts have received a positive response on Facebook worldwide.


Zacks Investment Research
Zacks Investment Research

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Shares of Planet Fitness have declined 20.3% in the past year compared with the industry’s 21% rise. Increased new store construction costs and interest rate expenses dented the company's performance. The inflation concerns remain a potent headwind. Chances of increase in materials, shipping, equipment and labor costs are likely to impact the company’s profitability in the upcoming period. The company has lowered its near-term store growth forecast due to the headwinds.

PLNT heavily relies on franchisees that reduces costs but pose risks. An Economic slowdown may harm its royalty fees and equipment sales, impacting revenue. Relying on franchisees also risks the brand image if they take unfavorable actions. Also, the company’s business could be damaged in the event of any third-party misappropriation, dilution, infringement or other violation of intellectual property.

Zacks Rank & Key Picks

Planet Fitness currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Consumer Discretionary sector are:

Royal Caribbean Cruises Ltd. RCL currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 100.7% 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 earnings per share (EPS) suggests growth of 55.3% and 181.9%, respectively, from the year-ago period’s levels.

Hilton Worldwide Holdings Inc. HLT flaunts a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 12.5%, on average. The stock has gained 23.7% in the past year.

The Zacks Consensus Estimate for HLT’s 2023 sales and EPS suggests increases of 14.8% and 23.7%, respectively, from the year-ago period’s levels.

OneSpaWorld Holdings Limited OSW currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 42.6%, on average. The stock has gained 23.6% in the past year.
The Zacks Consensus Estimate for OSW’s 2023 sales and EPS indicates growth of 44.5% and 117.9%, respectively, from the year-ago period’s levels.

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Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report

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OneSpaWorld Holdings Limited (OSW) : Free Stock Analysis Report

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