Planet Fitness (PLNT) has been under the spotlight following its third-quarter 2024 earnings, which surpassed analyst expectations. While the company continues to show strong growth backed by strategic initiatives, operational challenges persist. Zacks Investment Research provides a detailed analysis with a Neutral recommendation and a 6–12 month price target of $108.

Key Highlights from the Third-Quarter Performance

1. Earnings and Revenue Surpassed Expectations

Earnings per share (EPS): Adjusted EPS of $0.64 exceeded the Zacks Consensus Estimate by 10.3%.
Revenue Growth: Quarterly revenue reached $292.2 million, outperforming estimates by 3% and reflecting a 5.3% year-over-year growth.
The growth was driven by new club openings and a 4.3% increase in same-club sales.
2. Strong Segmental Performance

Franchise Revenue: Grew by 4.3% year-over-year to $102.2 million, boosted by new club openings and higher royalty income.
Corporate-Owned Clubs: Revenue rose by 13.1% year-over-year, totaling $128.1 million.
Equipment Sales: Although revenues dipped by 6.7%, EBITDA for the segment saw a 12.5% rise, signaling efficiency improvements.

Strategic Initiatives Driving Growth

1. Focused Pricing Strategy

Planet Fitness has introduced pricing tests for its Black Card memberships at $27.99 and $29.99.
The Classic Card membership price was raised to $15 in late June 2024. This adjustment is expected to yield a low to mid-single-digit increase in club revenue over the next year.
2. Franchisee-Centric Growth Model

The company’s revamped growth model aims to reduce capital requirements for franchisees, promoting long-term portfolio expansion.
By 2023-end, nearly all franchisees adopted this model, ensuring operational and financial stability.
3. Expanding Membership Base

Planet Fitness closed the quarter with 19.6 million members, representing a 4.3% increase in same-store memberships.
Initiatives like the High School Summer Pass program added 3 million teen participants, collectively logging over 12 million workouts.

Challenges to Watch

1. Rising Operational Costs

Persistent inflation is driving up labor, equipment, and shipping costs, which could dent profitability.
Increasing minimum wages in corporate-owned stores may exacerbate labor expenses.
2. Cyclical Nature of the Leisure Industry

Economic downturns pose risks to discretionary spending, potentially impacting membership retention and new club growth.
3. Dependence on Franchisees

Heavy reliance on franchise operations exposes Planet Fitness to brand reputation risks. Mismanagement by third-party franchisees could undermine customer trust.

Valuation and Market Position

1. Current Valuation Metrics

Planet Fitness trades at a forward P/E ratio of 40, above the industry average of 21.99.
The stock's year-to-date price has surged by 36.4%, outperforming its peers in the leisure sector.
2. Comparison with Competitors

Bowlero Corp. (BOWL): Trades at a forward P/E of 20.99 with a smaller market cap of $1.86 billion.
WW International (WW): Holds a higher growth score but faces profitability challenges.
Planet Fitness remains competitive with strong revenue growth and a solid brand presence, despite operating in a saturated market.

Technical Analysis and Price Targets

1. Fibonacci Levels

Support Levels: Immediate support at $95.70 and stronger support near $91.30.
Resistance Levels: First resistance is observed at $102.81, followed by a secondary level at $108.
2. Candlestick Patterns

Recent bullish candlesticks signal potential upward momentum. However, watch for consolidation near resistance zones.
3. Zacks Price Target

The 6–12 month price target is set at $108, reflecting a modest upside from the current price of $99.55.

Future Outlook

Planet Fitness has raised its full-year revenue growth outlook to 8–9%, driven by strong same-club sales and international expansion. The company's adjusted EPS is now expected to rise by 11–12% year-over-year, signaling confidence in its operational strategies.

Actionable Insights for Investors

Short-Term Strategy: Investors may consider entering positions near support levels of $95–$96, targeting the $108 resistance.
Long-Term Outlook: The company’s focus on franchisee growth and pricing adjustments offers sustainable growth prospects, making it a viable hold for long-term investors.