HomeMost PopularInvestingPlanet Fitness Reaps Rewards from Expansion, Allotting Investors Strict or "Hold" for...

Planet Fitness Reaps Rewards from Expansion, Allotting Investors Strict or “Hold” for Now

Actionable Trade Ideas

always free

Planet Fitness, Inc. PLNT is hitting it big by sprouting roots and playing strategic cards. The company is not afraid to reach for the sky with its fresh growth model – gear in for the rise up. Shares of PLNT have climbed 10.4% in the past three months while the entire industry fell by 8.8%. And what about the future? We’re looking at a 1.4% upshift in earnings estimates for 2023 over the past 30 days. Business-wise, things are looking up. Now, here’s where the rub comes in – the fat expenses are starting to take their toll.

Zacks Investment Research
Image Source: Zacks Investment Research

Now, let’s look into what’s driving its Zacks Rank #3 (β€œHold” for now).

Propulsions for Growth

Blazing Expansion: Planet Fitness is showing off as one of the fastest-growing operators of fitness centers in the United States. The company has 26 new stores opened in the third quarter of 2023 and aims for another 150–160 new stores during the year. With the market getting more health-conscious, PLNT is ready to make the most of it. The plan? Reach and operate 600 new stores by the end of 2025 from an eye-popping 4,000-plus domestic store opportunity over the long run

What’s the secret sauce? Planet Fitness is firing on all cylinders, with its new growth model – it’s revving up the returns from new stores without burning a hole in its pocket. Aiming to modify its franchise agreement and cut costs, the company is planning to tinker with the cardio and strength equipment and trim down operating expenses. Freeing up more capital for franchisees, Planet Fitness is changing lanes for long-term growth.

Strategic Success:The company is hitting the sweet spot with its marketing initiatives. By consolidating marketing agencies to one, the company is slashing media costs while reeling in more members. These moves are bearing fruit with increasing membership conversions and surpassing 18.5 million members in the third quarter of 2023.

The Hard Nuts to Crack

But, what about the bloated costs? The company is grappling with soaring new store construction costs and inflation threats. Higher expenses for materials, shipping, equipment, and labor are chomping at its profits. In the third quarter of 2023, the cost of revenue surged by 10.8% to $53.8 million, and our crystal ball projects a hefty 17.2% increase in the total cost of revenues for 2023.

Top Picks

For those looking for a sure shot, here are some better-ranked stocks from the Zacks Consumer Discretionary sector:

Royal Caribbean Cruises Ltd. RCL is riding high with a Zacks Rank #1. The company has had an average quarterly earnings surprise of 28.3% and its shares have soared by 73.9% in the past year. The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) forecasts a rise of 57.7% and 187.9% respectively.

Live Nation Entertainment, Inc. LYV flaunts a Zacks Rank #1. The company has had a stunning average quarterly earnings surprise of 37.5% and its shares have surged by 13.7% over the past year.

Skechers U.S.A., Inc. SKX carries a Zacks Rank #2. The company has had a solid average quarterly earnings surprise of 50.3% with its shares increasing by 36% in the past year.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.