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PTON vs PLNT: Which Fitness Stock is in the Best Shape?

We are already in February and the New Year’s resolutions made back at the start of last month are but a distant memory. Often topping the list of pledges to oneself at the start of each year is the promise to cut down on the bad stuff and get into shape. An oft neglected activity, though, once the daily routine kicks back in again.

Consumers, though, are increasingly aware of the benefits of a healthy lifestyle, and the trend has spawned a whole industry catering to the fitness minded public.

With this in mind (and body), we thought we’d investigate further. Using TipRanks’ Stock Comparison tool, we’ve lined up two fitness focused stocks side by side on the treadmill, to take a closer look at why some on the Street believe these two are compelling buys right now. Let’s jump right in.

Peloton Interactive (PTON)

One of 2019’s high profile IPOs, Peloton caused quite a stir when going public last September; the stationary bicycle company was valued at $8.1 billion on its first day of trading. By the second, it had shed $1 billion of its value, making the company’s trading debut one of the worst of the decade. Peloton dusted itself off, got back on the bike and finished off the year on a more positive note, back to roughly its original IPO price.

The company, though, is drawing negative sentiment again this week, following the release of its FQ2 2020 earnings report. Peloton posted revenue of $466.3 million, a year-over-year increase of 77%, and handily beating the estimate of $423.7 million. Net loss per share of $0.20 topped the Street’s $0.30 call, too. Estimates which called for 688,800 connected fitness subscribers were left in the dust by the figure of 712,005 – a 96% year-over-year gain.

Despite the positive print, following the earnings call, PTON shares were sent tumbling down by over 7% due to soft guidance for the next quarter. For Q3, Peloton expects revenue of between $470 million and $480 million, less than the Street’s call of $494 million.

With a 94% customer retention rate, though, Stifel’s Scott Devitt remains bullish on the bike maker. Devitt points out that the lower Q3 revenue guide was caused by shorter than expected delivery times, which shifted 6,000 Connected Fitness subscribers into Q2 from Q3. The 5-star analyst believes a higher total second half is implied in the company’s updated outlook. Peloton’s investments in content development and new markets, in addition to its ability to drive engagement with new and existing product offerings, are further encouraging signs.

What does it all mean, then? It means the 5-star analyst’s rating remains the same, a Buy, but the price target changes gear, up from $37 to $38. The new figure implies upside potential of 36%. (To watch Devitt’s track record, click here)

The Street is up for the ride, too. 17 Buys and 2 Holds add up to a Strong Buy consensus rating. At $36.94, the average price target suggests possible upside of 33%. (See Peloton stock-price forecast on TipRanks)

Planet Fitness (PLNT)

Planet Fitness’ ‘everyone is welcome’ strategy is paying off. The affordable gyms and “judgement free” atmosphere they generate has seen the company provide handsome returns to investors. Over the last five years, PLNT’s share price has increased by 427%.

Looking at the business’ growth, it’s no wonder investors have been impressed. Totaling over 14 million members, in 2019, the gym franchise added another 261 locations, a 15%-unit growth. The final day of the year saw the opening of its 2000th location in Colorado Springs. PLNT intends to open an additional 1,000 in the next five years, with its sights set on adding the 80% of people over the age of 14 in the US and Canada without a gym membership. The expansion is not limited to North America, either; Planet has just opened its first two locations in Australia. According to the company, a minimum of 35 new additions down under should be expected over the next several years.

Macquarie’s Paul Golding believes that relative to its peers, Planet Fitness stock is "substantially undervalued". Given the company’s annualized growth rate, the 4-star analyst thinks PLNT’s low price-point is appealing and its focus on the US market positions it "defensively". In addition, PLNT’s penetration rates are rising, with an increasing gym count and further potential runway for comp reacceleration.

Therefore, Golding kept his Outperform rating and $90 price target as is. This conveys the analyst’s belief PLNT will add a further 9% over the next year. (To watch Golding’s track record, click here)

The Street takes a break from the workout and nods in agreement. PLNT’s Strong Buy consensus rating breaks down into a unanimous 5 Buys. The average price target comes in at $86.80 and suggests possible gains in the shape of 5%. (See Planet Fitness price targets and analyst ratings on TipRanks)

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