Planet Fitness: A Long Runway for Growth
11/21/2017 5:00 am EST
Planet Fitness (PLNT) remains one of the best retail stories in the entire market, with a unique business model and a very long runway for growth, asserts Mike Cintolo, editor of Cabot Top Ten Trader.
The company, of course, is a national chain of fitness centers, and it’s thriving fundamentally because of its low price (membership starts at $10 per month, though there are higher-priced plans) and non-intimidating environment (Judgment Free Zones).
As a result, the chain appeals to a wide variety of exercisers (35% of members are under 35, 22% are over 55; 29% make less than $50k per year, 27% make more than 100k, etc.).
Because of bullish store economics (about a four-year payback) and a franchisee model (95% of new stores), the firm has a huge expansion plan, with room for more than 4,300 stores in the U.S. and Canada, up from 1,432 today.
The stock is strong in recent trading because of another great quarterly report last week—not only did sales (up 12%) and earnings (up 19%) top expectations, but EBITDA rose 22%, same-store sales rose 9.3% and the firm opened up 31 new locations in the quarter.
Even better, management said it was likely to hike the price of its popular black card membership by 10% (currently $20 per month), which was one reason the top brass hiked guidance.
We like this story a lot, and are impressed that, despite a thinly traded stock ($30 million per day), institutions are jumping in—349 mutual funds own 63 million shares today, up from 209/22 million a year ago.
PLNT has been in a slow, choppy uptrend for the past few months, generally riding its 50-day line higher over time. There have been some strong, big-volume rallies (including a romp higher in June and an earnings pop in August), along with some listless meandering. The stock's recent big, earnings-inspired jump to new highs keeps the uptrend intact; minor dips look buyable.