Morgan Stanley has reaffirmed its Overweight rating on Planet Fitness (NYSE: NYSE:PLNT) with a steady price target of $84.00.
The firm's analysis indicated that the fitness chain's significant presence in Florida is not expected to have a major financial impact, despite potential threats from hurricanes.
Planet Fitness operates approximately 90% of its locations through a franchise model, which typically shields the company from the financial volatility that can result from temporary disruptions.
The company's corporate store base, which accounts for about 25% of its units, is notably concentrated in Florida. This prompted a closer examination of how extended store closures in the state might affect membership trends.
The analysis comes at a time when Planet Fitness is in a seasonally slow period for membership growth, which could further minimize the impact of any temporary closures. The company's business model, focused on selling memberships, along with its franchise-operated structure, provides additional resilience against short-term events that could otherwise pose a risk to operations.
Despite the localized risk to its corporate stores in Florida, the findings suggest that Planet Fitness is well-positioned to weather potential disruptions without significant financial consequences. The company's strategic approach to franchising and membership sales continues to serve as a buffer against unforeseen challenges such as natural disasters.
In other recent news, Planet Fitness has been the subject of various analyst ratings and reports. Deutsche Bank began coverage of Planet Fitness with a cautious stance, assigning the stock a Hold rating and setting a price target of $71.00.
In contrast, BofA Securities increased its price target for Planet Fitness to $100, maintaining a Buy rating, citing the company's return to pre-pandemic performance levels and the anticipated growth of new units.
Exane BNP Paribas (OTC:BNPQY) and Baird upgraded their ratings to Outperform, with price targets of $97 and $92 respectively, noting the strategic approach of new CEO, Colleen Keating, and the company's robust franchise model. DA Davidson and BMO Capital Markets have also increased their price targets to $70 and $87 respectively, following a second-quarter earnings beat and a positive business outlook.
InvestingPro Insights
To complement Morgan Stanley's analysis of Planet Fitness (NYSE:PLNT), recent data from InvestingPro offers additional context to the company's financial position. As of the last twelve months ending Q2 2024, Planet Fitness reported a robust gross profit margin of 59.89%, aligning with the InvestingPro Tip highlighting the company's "impressive gross profit margins." This strong profitability metric underscores the efficiency of Planet Fitness's business model, which Morgan Stanley noted is resilient due to its franchise-heavy structure.
The company's revenue growth of 6.85% over the same period, coupled with an EBITDA growth of 12.46%, suggests that Planet Fitness continues to expand its operations effectively. This growth trajectory supports Morgan Stanley's Overweight rating and indicates that the company is well-positioned to absorb potential short-term disruptions, such as those that could be caused by hurricanes in Florida.
Another InvestingPro Tip notes that Planet Fitness is "trading at a high earnings multiple," with a P/E ratio of 41.6. While this might raise questions about valuation, it could also reflect investor confidence in the company's future growth prospects and its ability to maintain profitability even in challenging circumstances.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Planet Fitness, providing a deeper dive into the company's financial health and market position.
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