Stock Analysis & Ideas

Planet Fitness Stock (NYSE:PLNT) is up This Morning: Here’s Why

Story Highlights

Planet Fitness lands a nod from Raymond James analysts, sending the stock shooting upward. However, several potential downside factors lurk in the background.

Mondays may be the worst day of the week for a lot of people and certain lasagna-loving cats, but for chain gym leader Planet Fitness (NYSE:PLNT), it was a great morning indeed. That’s largely thanks to a surge in share price during Monday morning’s trading session.

Planet Fitness’ gains mainly stemmed from a change in mind at Raymond James. There, analyst Joseph Altobello gave the company a nice upgrade, going from “market perform” to “strong buy.” Raymond James cited a series of factors as reasons behind the upgrade.

The analyst started with the company’s status as a “recession-resistant business” and moved to its limited risk as a result of increased interest rates. Further, the company has very little in the way of near-term debt to address, and it enjoys a valuation that’s well under historical levels.

The last 12 months for Planet Fitness shares have been extremely volatile. The company achieved new peaks in its share price on several occasions. None of these peaks proved sustainable for more than a few trading days, however.

Worse, the company’s overall trajectory has been down, as the company went from a share price of around $80 this time last year to around $59 today.

Admittedly, Planet Fitness is starting to pull a lot of interest. I have significant concerns about the company’s overall track, but there are certainly reasons to get behind the company.

I’m very cautiously bullish on Planet Fitness as a result. Any investors should keep a careful eye for a turnaround here.

Investor Sentiment is Mixed for PLNT Stock

There’s good news and bad news when it comes to investor sentiment metrics at PLNT stock. Planet Fitness has a 4 out of 10 Smart Score on TipRanks. That’s the lowest level of “neutral.” Worse, it suggests a better than even chance that the company will ultimately lag the broader market.

However, this sentiment isn’t reflected in insider trading figures. Insider trading at Planet Fitness is overwhelmingly buy-weighted. That’s particularly true in aggregate numbers. There were very few informative buys or sells taking place.

The last such transaction took place six months ago when Chief Operations Officer William Bode sold $3,575 worth of stock. The overall numbers stand clearly in favor of buying interest at Planet Fitness.

In the last three months, buyers ruled the roost. There were seven buy transactions made by insiders since June 2022. That’s the entirety of insider trading at Planet Fitness in that time.

As for the last 12 months, the picture isn’t so overwhelmingly buy-weighted, but it’s still pretty close. There were six sell transactions staged over the last 12 months but 35 buy transactions. The aggregate numbers demonstrate that insiders have a clear interest in buying in.

PLNT Stock Has a Positive Front With Underlying Troubles

Right now, most of the metrics are looking up and in Planet Fitness’ favor. The company recovered most of its pandemic losses in sheer raw membership numbers. Planet Fitness’ second-quarter sales were up 63.5% against the same time in 2021.

That’s particularly true for a business whose biggest competitor might best be described as “exercising outdoors in the sunshine for free.” There were signs of that improvement continuing on. Two months ago, when Planet Fitness revealed its second-quarter earnings, its CEO, Chris Rondeau, noted the company was well on track for recovery.

Rondeau noted that 34% of mature stores were “…at or above pre-COVID membership levels”. Moreover, there was “…consistent momentum toward full recovery the longer our stores have been open since the temporary COVID closures”.

Yet there are signs of potential trouble ahead. Just five days ago, workers at the Planet Fitness location in Durham, North Carolina, went on strike. Their biggest reason: conditions at the location, among other factors. Additionally, there’s the matter of Raymond James’ analysis. Calling Planet Fitness “recession-resistant” seems like a bridge too far from here.

Granted, we’re heading into winter, and that’s going to limit the impact of “exercising outdoors in the sunshine for free.” People will likely be willing to pay a premium for the option to work out indoors, out of the cold and snow. However, that’s a temporary issue.

Spring will come again, as surely as it came the last time and all the times before that. So expecting winter to outlast the recession that’s about to hit—or already in progress—is likely expecting too much.

However, Raymond James certainly has a point about valuations. Planet Fitness share prices are running historically low. Better yet, they’re also well below the lowest price target.

That makes for an excellent buy-in opportunity. Perhaps not as good as it was back in March 2020, but these are the lowest prices per share seen since October 2020.

Additionally, Planet Fitness is hard at work ensuring its position in the community. An outreach program to teenagers—the “High School Summer Pass” program—got teens logging a combined total of 17 million workouts throughout the U.S.

How many of those teenagers would get memberships as a result? That’s not clear, but how many of them will one day come back to Planet Fitness locations should they want gym memberships later on?

Planet Fitness almost certainly laid some groundwork for future sales. As a marketing play, this has a good chance of being a champ.

Planet Fitness also proved a hit with Illinois high school sports. The Illinois High School Association just a week ago established a deal that made PLNTF Holdings—a Planet Fitness franchisee—the “official fitness partner of IHSA.”

This includes the promotion of several regional football rivalries. With high school sports in full swing, that’s a great promotional tie-in for Planet Fitness.

Is Planet Fitness Stock a Buy?

Turning to Wall Street, Planet Fitness has a Strong Buy consensus rating. That’s based on seven Buys and one Hold assigned in the past three months. The average Planet Fitness price target of $90.29 implies 53.6% upside potential. Analyst price targets range from a low of $75 per share to a high of $100 per share.

Conclusion: Is Planet Fitness Recession-Resistant Enough?

There’s certainly quite a bit to like about Planet Fitness. Its insiders are almost fanatical in their support of the company. Share prices haven’t been this low since the pandemic was in full swing. Analysts are lining up to get on the company’s side. Yet there are some concerns here as well. The impact of a recession will likely weigh on the company. People with a choice between paying to work out or paying to eat aren’t likely to keep their gym memberships current.

Potential labor troubles may spill out of the Durham area and hit other Planet Fitness locations. Given the current labor environment, that might close down some locations altogether, and that won’t help earnings any.

Still, all told, Planet Fitness has clear advantages, and that’s why I’m very cautiously bullish about it. Get your stop-losses in place accordingly and brace for impact ahead, but there’s a very clear path to victory for Planet Fitness. Given current price levels, getting on board might get your portfolio back in fighting shape.

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