Shares of Planet Fitness, Inc. (PLNT – Free Report) have declined 14% in the past six months against the industry’s growth of 26.4%. Inflation concerns are affecting the company. Chances of increase in costs of materials, shipping, equipment and labor are likely to impact its profitability.
However, strategic efforts, robust digitalization and solid brand presence bode well. Our model predicts PLNT’s earnings and sales in 2023 to witness growth of 33.1% and 12.8% year over year, respectively.
Let’s delve deeper and find out why investors should retain the stock despite dismal performance in the past six months.
Factors Likely to Drive Growth
The Zacks Rank #3 (Hold) company is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States. To boost its presence in Mexico, PLNT announced a joint venture made up of a prominent local retail services company and one of its largest U.S. developers. The agreement is set for the development of a minimum of 80 new stores over the next five years.
In an effort to expand its presence, Planet Fitness has been focusing on strategic partnerships and international expansions. It collaborated with iFit, a leader in online streaming home workouts. With this partnership, it also initiated a series of new workouts with minimal or no equipment, thereby making it available to everyone exclusively on the Planet Fitness App.
The company continues to focus on its marketing muscle to drive growth. Management stated that it has transitioned from 16 marketing agencies to one Publicis Groupe to fuel incremental member growth. The agency will be looking after PLNT’s creative and media placement for its annual New Year’s sale.
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For first-quarter 2023, Planet Fitness reported solid membership conversions on the back of its marketing and promotional offers. Also, it outpaced 2019 levels. During the quarter, membership levels came in at more than 18.1 million compared with 16.6 million in the previous quarter. For the rest of 2023, the company expects regularized joining trends and seasonality to continue.
Apart from attracting new members to its brand, engaging existing members via its mobile app is a priority. PLNT intends to achieve this by focusing on driving downloads, app usage and enhanced functionality such as referral incentives, in-app messaging, notifications and enhanced account management tools.
Meanwhile, Planet Fitness is witnessing solid traffic in its digital platform from both existing and non-existing members, particularly for iFit content. To encash on the positive trend, the company has announced a minority stake in the iFIT Health & Fitness business, during first-quarter 2021.
Stocks to Consider
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Royal Caribbean Cruises Ltd. (RCL – Free Report) , Trip.com Group Limited (TCOM – Free Report) and Bluegreen Vacations Holding Corporation (BVH – Free Report) , presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Royal Caribbean Cruises has a trailing four-quarter earnings surprise of 26.4%, on average. The Zacks Consensus Estimate for Royal Caribbean Cruises’ 2023 sales and EPS indicates rises of 48.5% and 162.9%, respectively, from the year-ago period’s levels.
Trip.com Group has a trailing four-quarter earnings surprise of 147.9%, on average. Shares of TCOM have increased 24.8% in the past year.
The Zacks Consensus Estimate for Trip.com Group’s 2023 sales and EPS implies surges of 102.2% and 334.5%, respectively, from the year-ago period’s levels.
Bluegreen Vacations has a trailing four-quarter earnings surprise of 24.7%, on average. Shares of BVH have gained 36.8% in the past year.
The Zacks Consensus Estimate for Bluegreen Vacations’ 2023 sales and EPS suggests improvements of 3.6% and 17.6%, respectively, from the year-ago period’s levels.