Monday may be the worst day of the week for many people and some lasagna-loving cats, but for gym chain leader Planet Fitness (NYSE: PLNT), it was a really beautiful morning. That’s largely thanks to a surge in the stock price during Monday morning’s trading session.
Planet Fitness’ gains stem primarily from a change in mindset at Raymond James. There, analyst Joseph Altobello gave the company a nice upgrade from “market performance” to “strong buy.” Raymond James cited a range of factors as reasons for the upgrade.
The analyst started with the company’s status as a “recession-resistant company” and moved on to its limited risk due to rising interest rates. Additionally, the company has very little short-term debt to settle and it enjoys a valuation well below historical levels.
The last 12 months for Planet Fitness shares have been extremely volatile. The company repeatedly hit new highs in its share price. However, none of these spikes proved to last for more than a few trading days.
Worse still, the company’s overall trajectory has been down as the company has gone from a stock price of around $80 last year to around $59 today.
Certainly, Planet Fitness is starting to generate a lot of interest. I have significant concerns about the overall direction of the company, but there are certainly reasons to support the company.
So I’m very cautiously optimistic about Planet Fitness. Any investor should keep a close eye out for a reversal here.
Investor sentiment is mixed for PLNT stocks
There is good news and bad news when it comes to investor sentiment indicators on PLNT stocks. Planet Fitness has a smart score of 4 out of 10 on TipRanks. This is the lowest level of “neutral”. Worse still, it suggests a more than equal likelihood that the company will ultimately lag the broader market.
However, this sentiment is not reflected in the insider trading figures. Insider trading at Planet Fitness is heavily weighted to purchases. This is especially true in aggregate numbers. There were very few informative buys or sells.
The last such transaction took place six months ago when COO William Bode sold $3,575 worth of shares. The overall numbers clearly argue for buying interest in Planet Fitness.
Over the past three months, buyers have ruled the roost. There have been seven buy trades made by insiders since June 2022. That’s the entirety of insider trading at Planet Fitness at this time.
Looking at the past 12 months, the picture isn’t that heavily weighted to purchases, but it’s still pretty close. There have been six sell transactions in the last 12 months, but 35 buy transactions. The aggregate numbers demonstrate that insiders have a clear interest in buying.
PLNT stock has a positive front with underlying issues
Right now most of the metrics are up and in favor of Planet Fitness. The company has recovered most of its pandemic losses in raw membership. Planet Fitness second quarter sales increased 63.5% over the same period in 2021.
This is especially true for a company whose biggest competitor could be described as “outdoor exercise in the sun for free”. There were signs that this improvement was continuing. Two months ago, when Planet Fitness reported its second quarter results, its CEO, Chris Rondeau, noted that the company was well on its way to recovery.
Rondeau noted that 34% of mature stores were “…at or above pre-COVID membership levels.” Additionally, there was “…steady momentum toward a full recovery as our stores are open from the temporary COVID closures.”
Still, there are signs of potential trouble ahead. Just five days ago, workers at Planet Fitness in Durham, North Carolina went on strike. Their main reason: the conditions on site, among other factors. In addition, there is the question of the analysis of Raymond James. Calling Planet Fitness “recession-resistant” seems like a bridge too far from here.
Granted, we’re headed into winter, and that’s going to limit the impact of “exercising outside in the sun for free.” People will probably be willing to pay more to be able to train indoors, sheltered from the cold and snow. However, this is a temporary problem.
Spring will come again, as surely as it came the last time and all the times before that. So expecting winter to survive the recession that is about to hit – or already underway – is probably too much to expect.
However, Raymond James certainly has a point about ratings. Planet Fitness stock price is at historic low. Even better, they are also well below the lowest price target.
This is an excellent buy-in opportunity. Maybe not as good as it was in March 2020, but these are the lowest prices per share seen since October 2020.
Additionally, Planet Fitness works hard to secure its standing in the community. An outreach program for teens – the “High School Summer Pass” program – has seen teens log a combined 17 million workouts across the U.S.
How many of those teens would get memberships as a result? It’s not clear, but how many of them will ever come back to Planet Fitness establishments if they want to join a gym later?
Planet Fitness has almost certainly laid the foundation for future sales. As a marketing game, this has a good chance of being a champion.
Planet Fitness was also a hit with Illinois high school sports. Just a week ago, the Illinois Association of High Schools reached an agreement that made PLNTF Holdings, a franchisee of Planet Fitness, the “Official Fitness Partner of IHSA.”
This includes promoting several regional football rivalries. With high school sports on the rise, this is a great promotional link for Planet Fitness.
Is Planet Fitness Stock a buy?
As far as Wall Street goes, Planet Fitness has a Strong Buy consensus rating. This is based on seven purchases and one block attributed over the past three months. Planet Fitness’ average 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 definitely a lot to like about Planet Fitness. Its insiders are almost fanatical in their support of the company. Stock prices haven’t been this low since the pandemic was in full swing. Analysts line up to side with the company. Yet there are also concerns here. The impact of a recession will likely weigh on the business. People who are given the choice between pay-to-workout or pay-to-eat are not likely to keep their gym membership up to date.
Potential labor issues may spill over from Durham Region to other Planet Fitness locations. Given the current work environment, this could shut down some sites altogether, and it won’t help revenue in any way.
Still, all things considered, Planet Fitness has clear benefits, and that’s why I’m very cautiously optimistic about it. Set your stop-losses accordingly and prepare for the impact to come, but there is a very clear path to victory for Planet Fitness. Given current price levels, getting on board could get your wallet in shape.
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