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PLNT Stock Rises 14% in 3 Months: Is it Time to Buy or Hold?
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Shares of Planet Fitness, Inc. (PLNT - Free Report) have gained 14.4% in the past three months compared with the Zacks Leisure and Recreation Services industry’s rise of 3%. Over the same timeframe, the Zacks Consumer Discretionary sector and S&P 500 have gained 5% and 2.2%, respectively.
PLNT is riding on a strong franchise model, disciplined expansion and a unique value proposition. Also, steady growth in foot traffic and improved web visit trends are aiding investor sentiments.
Image Source: Zacks Investment Research
Technical indicators are supportive of PLNT’s strong performance. The stock was recently trading at $82.39 on Friday, above its 50-day moving average of $77.50 and the 200-day moving average of $69.42. This technical strength reflects positive market perception and confidence in PLNT's financial health and prospects. So, should investors pour more capital into Planet Fitness now? Let’s take a closer look.
Image Source: Zacks Investment Research
Key Fundamentals Supporting PLNT's Stock Growth
Planet Fitness continues to differentiate itself in the high-value, low-price (HVLP) sector by focusing on creating a welcoming and inclusive member experience. The company’s "no gymtimidation" philosophy resonates well with its 19 million members. Its High School Summer Pass Program, which has attracted over 2.6 million teen participants, further emphasizes its commitment to fostering community and long-term membership growth.
In June 2024, Planet Fitness implemented a $15 pricing structure for new classic card members, which is expected to contribute to a low to mid-single-digit increase in average unit volume (AUV) over the next year. The company is also testing higher Black Card membership pricing, which could further enhance profitability and store-level returns if successful.
Planet Fitness focuses on reducing capital requirements for opening and operating its franchises and identifying ways to lower operating expenses. At the beginning of 2024, the company reported progress on the execution of this new business growth model to achieve the target of reducing new units and remodeling building costs by at least 10% before the end of 2024.
The company’s expansion into international markets, such as Spain, demonstrates its global potential. During the second quarter of 2024, the company opened its first European location in Barcelona and is exploring opportunities in high-growth areas with strong population density. Franchise growth remains a key driver of profitability, with franchisee profits directly enhancing corporate performance. The company’s asset-light franchise model also generates substantial free cash flow, supporting continued investment in growth initiatives and shareholder returns.
What May Pull Back PLNT Stock?
Planet Fitness’s asset-light franchise model generates strong free cash flow, but its recent debt financing raises questions. The company refinanced $600 million of debt and upsized the total to $800 million. Although this allowed for favorable interest rates compared to initial expectations, it still resulted in an increase in the company’s blended interest rate from 4.0% to 4.5%. With $2.2 billion in long-term debt and fixed-rate securitization, any economic downturn could strain Planet Fitness’s ability to manage its debt obligations effectively.
The equipment segment, which contributes a notable portion of overall revenue, is seeing a downward trend. In the second quarter, revenues from equipment sales dropped 8.4% year over year as franchisees shifted toward purchasing strength equipment over cardio machines, which generate less revenues per store. This decrease in equipment sales could continue to weigh on overall performance, particularly if store openings remain below expectations.
PLNT’s Rising Valuation & Estimates
Planet Fitness is trading at a premium relative to industry peers like Xponential Fitness, Inc. (XPOF - Free Report) , Peloton Interactive, Inc. (PTON - Free Report) and YETI Holdings, Inc. (YETI - Free Report) . PLNT is trading at a forward 12-month price-to-earnings of 30.24X, higher than the industry average of 16.22X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) increased from $2.43 to $2.44 in the past 60 days. During the same period, the consensus mark for 2025 EPS moved up from $2.83 to $2.84.
Image Source: Zacks Investment Research
Investment Verdict: Hold for Now
Planet Fitness presents a unique opportunity within the fitness industry through its HVLP business model, franchise-driven growth and strong brand positioning. The company’s ability to drive long-term membership growth, enhance profitability through pricing strategies, and expand internationally underscores its potential for sustained growth. However, concerns over rising debt levels, declining equipment sales, and a lofty valuation — trading at a premium compared to the industry — warrant caution.
For investors already holding PLNT stock, it may be wise to maintain their position and monitor the company’s ability to translate its strategies into sustainable long-term growth. For new investors, it might be prudent to wait for a more favorable entry point.
Image: Bigstock
PLNT Stock Rises 14% in 3 Months: Is it Time to Buy or Hold?
Shares of Planet Fitness, Inc. (PLNT - Free Report) have gained 14.4% in the past three months compared with the Zacks Leisure and Recreation Services industry’s rise of 3%. Over the same timeframe, the Zacks Consumer Discretionary sector and S&P 500 have gained 5% and 2.2%, respectively.
PLNT is riding on a strong franchise model, disciplined expansion and a unique value proposition. Also, steady growth in foot traffic and improved web visit trends are aiding investor sentiments.
Image Source: Zacks Investment Research
Technical indicators are supportive of PLNT’s strong performance. The stock was recently trading at $82.39 on Friday, above its 50-day moving average of $77.50 and the 200-day moving average of $69.42. This technical strength reflects positive market perception and confidence in PLNT's financial health and prospects. So, should investors pour more capital into Planet Fitness now? Let’s take a closer look.
Image Source: Zacks Investment Research
Key Fundamentals Supporting PLNT's Stock Growth
Planet Fitness continues to differentiate itself in the high-value, low-price (HVLP) sector by focusing on creating a welcoming and inclusive member experience. The company’s "no gymtimidation" philosophy resonates well with its 19 million members. Its High School Summer Pass Program, which has attracted over 2.6 million teen participants, further emphasizes its commitment to fostering community and long-term membership growth.
In June 2024, Planet Fitness implemented a $15 pricing structure for new classic card members, which is expected to contribute to a low to mid-single-digit increase in average unit volume (AUV) over the next year. The company is also testing higher Black Card membership pricing, which could further enhance profitability and store-level returns if successful.
Planet Fitness focuses on reducing capital requirements for opening and operating its franchises and identifying ways to lower operating expenses. At the beginning of 2024, the company reported progress on the execution of this new business growth model to achieve the target of reducing new units and remodeling building costs by at least 10% before the end of 2024.
The company’s expansion into international markets, such as Spain, demonstrates its global potential. During the second quarter of 2024, the company opened its first European location in Barcelona and is exploring opportunities in high-growth areas with strong population density. Franchise growth remains a key driver of profitability, with franchisee profits directly enhancing corporate performance. The company’s asset-light franchise model also generates substantial free cash flow, supporting continued investment in growth initiatives and shareholder returns.
What May Pull Back PLNT Stock?
Planet Fitness’s asset-light franchise model generates strong free cash flow, but its recent debt financing raises questions. The company refinanced $600 million of debt and upsized the total to $800 million. Although this allowed for favorable interest rates compared to initial expectations, it still resulted in an increase in the company’s blended interest rate from 4.0% to 4.5%. With $2.2 billion in long-term debt and fixed-rate securitization, any economic downturn could strain Planet Fitness’s ability to manage its debt obligations effectively.
The equipment segment, which contributes a notable portion of overall revenue, is seeing a downward trend. In the second quarter, revenues from equipment sales dropped 8.4% year over year as franchisees shifted toward purchasing strength equipment over cardio machines, which generate less revenues per store. This decrease in equipment sales could continue to weigh on overall performance, particularly if store openings remain below expectations.
PLNT’s Rising Valuation & Estimates
Planet Fitness is trading at a premium relative to industry peers like Xponential Fitness, Inc. (XPOF - Free Report) , Peloton Interactive, Inc. (PTON - Free Report) and YETI Holdings, Inc. (YETI - Free Report) . PLNT is trading at a forward 12-month price-to-earnings of 30.24X, higher than the industry average of 16.22X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) increased from $2.43 to $2.44 in the past 60 days. During the same period, the consensus mark for 2025 EPS moved up from $2.83 to $2.84.
Image Source: Zacks Investment Research
Investment Verdict: Hold for Now
Planet Fitness presents a unique opportunity within the fitness industry through its HVLP business model, franchise-driven growth and strong brand positioning. The company’s ability to drive long-term membership growth, enhance profitability through pricing strategies, and expand internationally underscores its potential for sustained growth. However, concerns over rising debt levels, declining equipment sales, and a lofty valuation — trading at a premium compared to the industry — warrant caution.
For investors already holding PLNT stock, it may be wise to maintain their position and monitor the company’s ability to translate its strategies into sustainable long-term growth. For new investors, it might be prudent to wait for a more favorable entry point.
PLNT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.