Planet Fitness, Inc.’s PLNT share price has plunged 10.7% in the past three months. However, despite the declining trend, the stock has outpaced the Zacks Leisure and Recreation Services industry, the broader Zacks Consumer Discretionary sector and the S&P 500 in the same time frame. The detailed price performance can be studied from the chart below.

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This leading franchisor and operator of fitness centers in the United States is faring well compared to the competitive market in which it operates because of its focus on the new low-cost business model, favorable pricing initiatives across its different membership plans and accretive expansion strategies.

Notably, PLNT stock has also outperformed some of the other industry players in the past three months, namely Xponential Fitness, Inc. XPOF, OneSpaWorld Holdings Limited OSW and Peloton Interactive PTON. During the said time frame, Xponential Fitness, OneSpaWorld and Peloton have tumbled 52.2%, 20.1% and 43.6%, respectively.

Despite realizing benefits from its in-house initiatives to drive business growth and profitability, PLNT is facing pressures in the form of elevated costs and expenses, given the lingering inflationary scenario and ongoing global macroeconomic risks.

Factors Boosting Planet Fitness’ Growth

Planet Fitness is a Hampton-based franchisor and operator of fitness centers with approximately 19.7 million members and 2,722 clubs in all 50 states of the United States, the District of Columbia, Puerto Rico, Canada, Panama, Mexico, Australia and Spain. In this uncertain and complex economic scenario, running a business seamlessly and ensuring profitability is an arduous task, especially on a global scale. To minimize the adverse impacts of the market on its growth and profitability structure, the company has enacted several in-house initiatives that ensure significant market share gain, cost optimization and increased cash flow.

Planet Fitness inculcated a new enhanced economic growth model in 2024, which encompasses opening and operating a Planet Fitness club with reduced build costs, extensions on capital investment timelines and elimination of certain fees. The primary objective of this new growth model is to enhance returns from new stores without significantly impacting its P&L. In 2025, Planet Fitness is focusing on shifting from a divisional structure to a fit-for-strategy operating model to ensure sustainable long-term growth. This strategic shift will ensure the integration of functional capabilities across the organization and strengthen accountability for its leaders and team members.

Moreover, PLNT successfully integrated its pricing trials into its daily business after receiving positive feedback from its members and potential members. After the trial initiation, it announced the final pricing of its Classic Card membership to be $15 and implemented it in late June 2024. Currently, the pricing trials on its premium Black Card membership are ongoing and are expected to have continued till the first quarter of 2025.

Notably, PLNT’s brand presence in international markets is encouraging as it continuously explores the possibility of adopting a smaller store footprint, which could facilitate expansion into suburban areas and new geographies that might not meet the standard population requirements. In terms of expansion, the company reported 150 new club openings system-wide (129 franchisee-owned and 21 corporate-owned clubs) during 2024. As of Dec. 31, 2024, the company housed 2,722 system-wide total clubs, with the expectation of opening 160-170 new clubs during 2025, including both franchise and corporate locations.

Estimate Trend Favors Planet Fitness

Earnings estimates for 2025 have inched up in the past seven days by 0.3%, indicating improving sentiments among analysts. Besides, the year-over-year expected growth rate for the 2025 earnings currently stands at 12.4%, with a 17% increase projected for the first quarter. The uptrend reflects PLNT’s successful efforts in cost optimization and the benefits realized from its expansion strategies.

EPS Trend

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PLNT Trading at a Premium

Planet Fitness is currently trading at a premium compared with the industry peers on a forward 12-month price-to-earnings (P/E) ratio basis. The premium valuation indicates that the stock is trading above its industry peers, making it difficult for investors to figure out a suitable entry point.

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However, the overvaluation of PLNT stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up. The other players including Xponential Fitness and OneSpaWorld are currently trading at 7.85X and 14.68X, respectively on a forward 12-month P/E ratio basis, while Peloton has a P/E ratio of negative 20.82X.

Headwinds to PLNT’s Prospects

Currently, the global market scenario is under pressure and navigating risks due to the newly levied tariffs. Lingering inflationary pressures and potential foreign exchange risks are added concerns. A company operating in international markets, like Planet Fitness, is likely to be more vulnerable to economic uncertainties than firms operating within domestic boundaries.

Given PLNT’s business nature, the company is open to headwinds in the form of increased materials, shipping, equipment and labor costs, which have direct adverse impacts on its and its franchisees' profitability. Any escalation in the minimum wage would result in higher labor costs for the company. The ability of the company to fully offset such cost increases in the future remains uncertain. The company is cautious of the uncertain macroeconomic environment.

Investment Thoughts on PLNT

Per the above discussion, Planet Fitness is benefiting from the strategic execution of its low-cost business growth model, favorable pricing initiatives for its membership plans and new club openings globally.

However, its cost optimization efforts are falling behind due to the market's uncertain scenario and inflationary pressures. In 2024, PLNT’s total operating costs and expenses jumped 7.4% year over year to $857.5 million due to elevated club operations expenses and National Advertising Fund expenses.

Thus, considering both sides of the market scenario, it is prudent for existing investors to retain this Zacks Rank #3 (Hold) company’s shares for now, whereas new investors might want to wait for a more favorable entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Planet Fitness, Inc. (PLNT) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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