On Thursday, Exane BNP Paribas (OTC:BNPQY) changed its stance on shares of Planet Fitness (NYSE:NYSE:PLNT), upgrading the stock from Neutral to Outperform and raising the price target to $97.00. The upgrade was influenced by the new CEO Colleen Keating's strategic approach discussed during the second-quarter earnings call for 2024.
The firm highlighted positive feedback from checks and investors, as well as a shift in the narrative towards the fitness chain’s long-term growth potential.
Exane BNP Paribas expects Planet Fitness to see a reacceleration in store openings heading into 2025 and 2026, which could bolster the stock as the market shows patience with the company's turnaround efforts.
Moreover, the firm pointed out that adjustments to pricing, specifically an increase in the Classic Card price to $15, could enhance Year 2 EBITDA by 25%. Planet Fitness is also testing an increase in Black Card pricing by 12-20%, which could potentially improve cash-on-cash returns beyond 2019 levels.
The report also mentioned new business strategies that could contribute to the company’s success. These include hiring a new CMO to target Generation Z, enhancing the member experience, extending the remodel and re-equip cycle, and the potential for implementing measures such as abatements in the first year of store operations. Furthermore, the analyst suggested that anticipated lower interest rates could further improve returns, spurring store openings.
Exane BNP Paribas conducted a penetration analysis that suggests a path to over 4,000 Planet Fitness units. They noted that the company's current penetration in the U.S. market is approximately 6%, with top markets reaching 9% in 2019 and 11% in 2023.
The firm believes that closing this gap is feasible, especially with improving returns. They forecast approximately 195 new openings in 2024 and around 220 in 2026, which exceeds consensus estimates by 16% and 20%, respectively. The new price target of $97 is based on an 18.5x EV/EBITDA multiple.
InvestingPro Insights
As Planet Fitness (NYSE:PLNT) continues to focus on long-term growth and strategic initiatives under new leadership, real-time data from InvestingPro provides a clearer picture of the company's financial health and market position.
With a solid market capitalization of $6.91 billion and a robust gross profit margin of nearly 60% over the last twelve months as of Q2 2024, Planet Fitness demonstrates a strong ability to generate revenue efficiently. Despite concerns raised by 11 analysts revising their earnings downwards for the upcoming period, the company's liquid assets surpass short-term obligations, indicating a healthy liquidity status.
Investors should note that Planet Fitness is trading at a high earnings multiple with a P/E ratio of 43.14, which suggests a premium market valuation. This is also reflected in the company's high revenue valuation multiple. However, the company's impressive return over the last three months, with a 20.32% price total return, and its performance over the last decade reinforce its potential as a growth stock.
For those considering an investment in Planet Fitness, there are 12 additional InvestingPro Tips available, providing deeper insights into the company's performance and valuation metrics. These tips can be accessed at https://www.investing.com/pro/PLNT.
With the stock trading near its 52-week high at 97.44% of the peak and analysts predicting profitability this year, Planet Fitness appears poised to capitalize on its strategic initiatives and market opportunities. The InvestingPro Fair Value estimate of $80.2 also provides a benchmark for investors to gauge the stock's current price level in the context of analyst expectations and intrinsic value assessments.
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