The Covid-19 pandemic has closed gyms, pushing consumers to work out at home. But an analyst at Macquarie is bullish on both
Peloton stock (ticker: PTON) has soared to new highs, rocketing 368% so far in 2020. With gyms were closed, Peloton sales soared as consumers poneyed up for the company’s premium exercise bike and $39-a-month connected fitness subscription. At the same time, Planet Fitness stock (PLNT) fell 15%.
Macquarie analyst Paul Golding has Outperform ratings on both stocks. On Tuesday, he raised his Peloton price target to $150, and maintained a $78 price target on Planet Fitness. That represents 13% and 23% respective upside for the stocks.
Golding thinks Peloton is a good value for consumers, at the price of about three SoulCycle classes a month. He thinks the company’s can leverage its value and bundle equipment. He also thinks it could acquire an athleisure brand or develop a strength platform either by issuing more shares or using liquidity on hand, if the company wants to own the broader fitness category.
Consumers can get a Peloton bike for about $49 a month, the Peloton Treadmill at about $64 a month, and the membership at $39 a month. He thinks an additional $8 a month for a bench and weights could help boost retention. Such a scenario highlights the trouble Peloton could spell for gyms. Golding expects membership cancellations to hit midtier and high-end gyms, boutique gyms, and studios.
But if consumers combine Peloton’s at-home instruction with a low-cost gym membership, Planet Fitness could actually stand out, according to Golding.
“Enter Planet Fitness—with its almost 2,100 stores and Black Card reciprocity, and with a 50% gym membership rate across Peloton subscribers as an example across in-home platforms, we think Planet Fitness is poised to become the de facto bricks-and-mortar gym for many looking to diversify their fitness offerings,” Golding wrote. “And of course, reciprocity comes by virtue of being open and well capitalized.”
Pointing to industrywide struggles, Golding thinks Planet Fitness can benefit from consolidation.
“We think certain swaths of the competitive landscape like midtier gyms as well as boutiques and studios are likely to be affected by the secular shifts toward virtual fitness, leaving fewer brick -and-mortar alternatives to Planet domestically (especially at these price-points), and leaving more real estate available for Planet franchisees to take advantage of,” he wrote.
In Tuesday morning trading, Peloton stock is down about 1% to $131.90, while Planet Fitness stock is flat.
Write to Connor Smith at [email protected]