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On Wednesday, BofA Securities adjusted its outlook on Planet Fitness (NYSE:PLNT) shares, reducing the price target from $130.00 to $115.00, while still recommending a Buy rating for investors. The adjustment follows Planet Fitness’s fourth-quarter earnings report, which showed an adjusted earnings per share (EPS) of $0.70, surpassing BofA Securities’ estimate of $0.62. The company’s current market capitalization stands at $7.59 billion, with the stock trading at $90.12. According to InvestingPro data, the company maintains impressive gross profit margins of 58.73%. The better-than-expected performance was attributed to robust same-club sales growth of 5.5%, which exceeded the firm’s 4.0% projection.
The increase in sales was largely driven by a growth in the rate of Black card membership, which saw a 200 basis point increase from the previous year, reaching a penetration rate of 64%. Additionally, Planet Fitness concluded the year with a membership base of 19.7 million, marking an increase of 100,000 net members since the third quarter. This growth contributed to an impressive 18.01% year-over-year revenue increase. InvestingPro subscribers have access to 13 additional exclusive insights about Planet Fitness’s performance and valuation metrics. BofA Securities highlighted that the attrition rate remained flat year-over-year, contributing to the stronger net membership figures for the year.
The revised price objective of $115.00 is now based on an enterprise value (EV) multiple of 18-19 times the forecasted calendar year 2026 adjusted EBITDA of $616 million, which was previously projected to be $574 million. This change reflects a recalibration to account for lower sector multiples, as explained by BofA Securities. Current valuation metrics from InvestingPro show the stock trading at an EV/EBITDA multiple of 20.02x and a P/E ratio of 48.5x, suggesting premium valuations relative to the broader market.
Planet Fitness’s financial performance in the fourth quarter of 2024, coupled with a consistent membership growth and a solid increase in Black card penetration, underscores the company’s market position. Despite the lowered price target, BofA Securities’ continued Buy rating indicates a positive outlook for the fitness chain’s stock. The firm’s analysis suggests that while adjusting expectations to current market conditions, they still see value in the company’s growth prospects.
In other recent news, Planet Fitness reported its fourth-quarter 2024 earnings, surpassing Wall Street expectations with an earnings per share (EPS) of $0.70, compared to the forecast of $0.62. The company also exceeded revenue projections, reporting $340.5 million against the anticipated $323.8 million, marking a year-over-year revenue increase of 19.4%. Despite these strong financial results, Piper Sandler adjusted its price target for Planet Fitness shares from $123 to $115, maintaining an Overweight rating, which indicates confidence in the stock’s performance relative to the market. The analysts at Piper Sandler noted that Planet Fitness has a well-managed cost structure despite increased personnel expenses and highlighted potential growth drivers. The company plans to open 160-170 new clubs in 2025, aiming for a 10% revenue growth and a similar increase in adjusted EBITDA. The management emphasized the brand’s growing appeal, particularly among Gen Z, which now accounts for nearly 10% of its membership base. Additionally, Planet Fitness is focusing on strategic growth initiatives and enhancing franchisee economics to support its expansion plans.
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