Bank Of America Remains Bullish On Planet Fitness, Says Core Still Strong

Planet Fitness Inc’s PLNT stock has been added to the Russell 1000 Index and removed from the Russell 2000 Index. The pullback in the company’s stock due to this Russell rebalancing has created “a particularly attractive entry point,” according to Bank of America.

The Analyst

Bank of America’s Rafe Jadrosich maintained a Buy rating on Planet Fitness with a price target of $88.

The Thesis

Shares of Planet Fitness have declined by almost 10% over the last seven trading days and should recover quickly after the Russell rebalance, Jadrosich said in a note.

In mid-June, Planet Fitness’ largest franchisee United PF Partners added another 26 Planet Fitness clubs, taking the total to 152 clubs. Franchisee group consolidation and robust corporate margins imply that the company’s franchisee returns continue to be compelling.

Jadrosich mentioned that Planet Fitness continues to be a top pick given its industry-leading unit growth rate and same-store sales outlook, its pricing power on its premium membership, its significant potential for capital returns and the strong franchisee unit economics.

“Planet Fitness is relatively immune to many of the other issues causing volatility in the retail stocks including tariffs, e-commerce market share / investment spend pressure, rising wages, and a softer 1Q19 vs. expectations,” the analyst wrote in the note.

Price Action

Shares of Planet Fitness traded higher by 3.7% to $75.14 at time of publication Monday morning.