Time To Buy Into Planet Fitness Stock

Time To Buy Into Planet Fitness Stock

Gym operator Planet Fitness (NYSE:) stock is pulling back down despite the reopening trend continuing to accelerate. Planet Fitness survived the pandemic with its 4,000 locations and 98% of its gyms open and operating at the end of Q2 2021. Membership and revenue momentum is continuing to accelerate despite the Company lowballing forward estimates.

Keep in mind the pandemic produced a war of attrition for national chains as struggling mom and pop businesses went out of business. The nation experienced so many gym closings during the pandemic that Planet Fitness was able to grow market share just by staying in business. This is the theme behind the run-up in national chains, especially in the restaurant segment.

While the Delta variant of COVID-19 is spreading rapidly, the acceleration of and booster shots continue to be an effective remedy moving forward. The permanent closures of local gyms have left a void in the fracture industry that Planet Fitness is determined to fill. Prudent investors looking for exposure in the amid reopening trends can watch for opportunistic pullbacks in shares of Planet Fitness.

Q2 2021 Earnings Release

On Aug. 9, 2021, Planet Fitness released its fiscal for the quarter ending June 2021. The Company reported an adjusted earnings-per-share (EPS) profit of $0.21 excluding non-recurring items versus consensus analyst estimates for a profit of $0.23, missing estimates by (-$0.02). Revenues rose 241.1% year-over-year (YOY) to $137.25 million, beating analyst estimates for $127.56 million.

The Company had 98% of their gyms open by the end of the quarter. Planet Fitness CEO Chris Rondeau commented:

“Our membership momentum continues to defy our historical seasonal patterns, and, as of the end of July we had more than 15 million members. It’s a testament to the strength of our brand that more than 13 million people remained members of Planet Fitness in the depths of the global pandemic when most of our gyms were temporarily closed. And today, with nearly all of our stores reopened, existing members are re-engaging with us, and net membership is continuing to climb as people realize the importance of fitness to their overall wellness.

“There is a dislocation in the fitness industry with approximately 22 percent of U.S. gyms permanently closed due to the impact from COVID-19 through the end of the second quarter, while, at the same time, more Americans are realizing that fitness is essential to physical, mental, and emotional well-being. We believe Planet Fitness is the place that fills that gap with our affordable, non-intimidating workout environment, and, as a result, we are confident in achieving and possibly exceeding our long-term target of 4,000 locations in the U.S.”

Lowered Guidance

Planet Fitness issued downside guidance for full-year 2021 with EPS ranging from $0.065 to $0.70 versus $0.93 consensus analyst estimates. The Company sees full-year 2021 revenues between $530 million to $545 million compared to $541.68 million analyst estimates. Adjusted EBITDA is expected to range between $200 million to $210 million.

Conference Call Takeaways

CEO Rondeau set the tone:

“We believe the unseasonal momentum in our membership gains is fueled by people recognizing the importance of self-care. Our messaging to consumers is about taking the first step of getting off the couch and getting into a fitness routine. Our national May sale of 1 month free and no commitment removed all the barriers to doing so. As a result, total net member growth in May was 3x our growth in May 2019. In June, we ran a Black Card flash sale. And for the month, net member growth was nearly 20x what we saw in June 2019, during which we ran a similar offer.”

He noted the digital innovation silver lining of the pandemic:

“While COVID had a temporary impact on our business, there are areas that the pandemic accelerated such as our digital strategy. When we shut down our stores last year, we quickly shifted to keeping our members engaged digitally with free workouts offered via the web and our mobile app. And as we announced last quarter, we strengthened our partnership with iFit to unlock future opportunities to further accelerate our digital content strategy. App adoption by our members is nearly 60%, having grown from 40% in Q4 2020. During Q3, we plan to roll out a Refer a Friend incentive program through the app.”

He expects to over 75 to 100 new gyms in 2021.

PLNT Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for PLNT stock. The weekly rifle chart is in a make or break set-up as the bearish moving average (MA) inverse pup breakdown attempts to form against the bullish stochastic mini pup. The weekly 5-period MA is falling at $74.29 after peaking off the $76.07 Fibonacci (fib) level on the initial stochastic mini pup.

The weekly market structure low (MSL) buy triggers above $77.61. The weekly lower Bollinger® Bands (BBs) at $65.77 would be the downside target if the weekly stochastic loses steam and crosses back down. The daily rifle chart is in a downtrend with a falling 5-period MA at $71.87 and overshooting the daily lower BBs at $69.03. The BBs appear to be expanding after a period of price compression.

This should provide opportunistic pullback levels at the $68.86 fib, $66.64 fib, $64.89 fib, $62.77 fib, $61.43 fib, and the $59.14 fib level. The upside trajectories range from the $79.25 fib up to the $100.31 fib level.

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