Gyms have been forced to adapt to the new normal, but one fitness stock has charged past all the others.â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â âÂ
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A Fitness Stock With Room to Run
Matthew Carr | Chief Trends Strategist | The Oxford Club
[Matthew Carr]
"Where are you going?" my wife laughed.
Since the [COVID-19]( stay-at-home orders were put in place, I've jogged or run a total of 1,062 miles.
That's enough to get me from my home in Maryland to Tallahassee, Florida... or Little Rock, Arkansas.
Instead of running outdoors, I've run in place like a mouse on a wheel, feasting on sugary mental treats like Locke & Key, Supernatural, Daybreak, The Walking Dead, Into the Badlands, and pretty much every apocalypse-based television show (good and bad).
They give me motivation.
Because I keep thinking about Columbus' No. 1 rule for surviving Zombieland: cardio.
But I'm not alone in racking up miles on the treadmill in recent months.
During the recent shutdowns, select fitness stocks have become Wall Street darlings.
They've emerged as part of the [stay-at-home economy](. And many of the stocks in that larger group have rewarded investors mightily this year.
These companies have been either quick on their feet or perfectly positioned to benefit from the tens of millions of Americans forced to stay indoors and [embrace the digital world](.
But with economies slowly reopening, there's another fitness stock I think we should add to that list.
Not All Fitness Stocks Are Healthy
There has been one rule that businesses have had to follow above all during the pandemic: Embrace [connectivity](.
If companies didn't have an online presence and couldn't make the transition, they were essentially dead in the water.
Unfortunately, a gym can't go virtual as easily as a retailer or an office can.
But classes and training sessions can move online. And they have.
Because of this, we're seeing a surge in athletic spending.
In May, payment processor ACI Worldwide (Nasdaq: ACIW) reported global e-commerce sales rose 81% year over year. Sales of sportswear and sporting goods skyrocketing 216% was the biggest driving force behind this.
Part of that has helped fuel the marathon runs in shares of lululemon (Nasdaq: LULU), Nautilus (NYSE: NLS) and [Peloton]( (Nasdaq: PTON).
[Fitness Stocks Race Higher]
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These three have the wind at their backs. (Nautilus and Peloton also have sales based on Columbus' No. 1 rule.)
But there won't be a victory lap for everyone...
Because of the [quarantine]( more than 38,000 gyms and fitness studios closed across the U.S.
And some of these will never reopen their doors.
In fact, 24-Hour Fitness has filed for bankruptcy. The company announced it'll permanently close its 134 U.S. locations. CEO Tony Ueber specifically cited COVID-19 as the culprit.
Gold's Gym has filed for bankruptcy and permanently closed 30 company-owned locations.
And some of the worst-performing fitness stocks in 2020 are suffering from the same fate.
YogaWorks (OTC: YOGA) shares have essentially been cut in half this year. That's considerably worse than Planet Fitness (NYSE: PLNT) and Dick's Sporting Goods (NYSE: DKS), two other fitness names not in the green for 2020...
[Worst Fitness Stocks - YTD]
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YogaWorks was already struggling prior to the [pandemic]( particularly in high-rent areas of the country. It is now permanently closing all of its New York City locations.
Dick's has bounced back from its year-to-date lows. But the company faces some long-term woes as brands are increasingly moving to direct-to-consumer sales.
But of these three stocks, one continues to buck the trend. (Nautilus and Peloton also have sales based on Columbus' cardio rule.)
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A Discounted Digital Adopter
[Planet Fitness]( has more than 2,000 locations. And the company continues to open more.
At the moment, about 800 of these have reopened, with another 200 planning to open by the end of June.
It's no surprise that the gym operator is facing a lean year. Expectations are for a 32% decline in revenue to $468.29 million, with earnings per share tumbling nearly 60% to $0.64.
But shares have had an enormous rebound from their lows.
And I think Planet Fitness deserves some credit.
It dove headlong into digital content. It pivoted to posting daily workouts on Facebook Live. It partnered with online streaming workout provider iFit, as well as The Biggest Loser, and pushed users to its app and [YouTube channel](. Both of these digital channels have seen usage more than double.
Planet Fitness beat first quarter expectations as same-store sales increased 9.8% and it opened 39 new locations.
And here's a key point to remember...
Roughly a quarter of Planet Fitness' revenue comes from equipment sales. The company requires franchisees to buy new equipment from it every few years.
So that's a nice slice of recurring revenue built into its business model.
Shares of Planet Fitness are trading more than 20% below their 52-week high of $88.77. And they could be worth a look after their recent pullback.
Right now, hundreds of thousands of businesses in the U.S. are fighting for survival. And no amount of cardio will save them... only [going digital]( will.
You can argue that fitness will be forever changed by COVID-19. And Planet Fitness is showing an ability to adapt to and embrace these changes.
It has a low-cost membership model. And while other competitors filed for Chapter 11, it targeted new ways to engage its base.
That's going to make all the difference in the long run.
Here's to high returns,
Matthew
P.S. Planet Fitness isn't the only company that has ramped up its tech usage recently.
Wearables are on the rise. And thanks to them, people no longer have to go to the gym to log the data of a workout.
I've identified a company that's going to DOMINATE the wearables space.
After this pandemic, gyms might be empty for a long time. So these wearables are going to become a MUCH bigger trend in the months ahead...
And this company does so much more than fitness...
Don't miss the opportunity to get in on this massively profitable sector. [Click here to find out more.](
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