On Friday, DA Davidson maintained a Neutral stance on Planet Fitness (NYSE: NYSE:PLNT) but increased the stock's price target from $70.00 to $87.00. The stock, currently trading at $101.02 and near its 52-week high of $102.81, has shown remarkable momentum with a 66.15% gain over the past six months.
According to InvestingPro analysis, the company appears to be trading above its Fair Value. The revision follows Planet Fitness's announcement on November 7th of a third-quarter performance that surpassed expectations and an upward adjustment of its 2024 guidance. The company experienced an unexpectedly positive reaction from franchisees to its initiative encouraging the purchase of additional strength equipment. This enthusiasm is projected to contribute approximately $20 million to the fourth-quarter revenue for 2024.
The analyst noted that Planet Fitness plans to balance this revenue boost with strategic corporate investments. Despite the raised revenue forecast for the fourth quarter of 2024, the earnings per share (EPS) estimate remains unchanged at $0.60. The company maintains impressive gross profit margins of 60.33%, and InvestingPro data shows a strong overall financial health score, suggesting solid operational efficiency.
Subscribers to InvestingPro can access 18 additional valuable insights about PLNT's financial performance and market position. Additionally, the firm has introduced an EPS forecast for 2026 and increased the target price-to-earnings (P/E) ratio from 24x to 26x.
This adjustment reflects greater confidence in the company's revenue prospects, particularly considering the impact on membership growth from the increase in monthly fees to $15 from $10.
The new price target of $87 is based on the 26x multiple applied to the anticipated 2026 EPS of $3.35. The analyst's decision to lift the target price is a response to the clearer visibility into the company's top-line growth and the potential effects of its pricing strategy on membership expansion. Despite the positive adjustments to revenue and price target, the firm's rating on the stock remains unchanged at Neutral.
Planet Fitness's strategy to invest in additional strength equipment appears to be a calculated move to drive revenue growth in the near term while also investing in the company's long-term strategic goals. The unchanged EPS estimate for the fourth quarter suggests a conservative stance on profitability amid these investments. With a current market capitalization of $8.55 billion and a P/E ratio of 54.4x, investors should note the premium valuation.
The new forecasts and target price reflect a more optimistic view on the company's financial performance in the upcoming years. For a comprehensive analysis of PLNT's valuation metrics and growth potential, check out the detailed Pro Research Report available on InvestingPro.
In other recent news, Planet Fitness has been the focus of several significant developments. BMO Capital maintained an Outperform rating on the company, raising the price target from $87 to $100.
This adjustment was made following Planet Fitness's strong third-quarter earnings, which exceeded expectations despite concerns about unit growth, membership numbers, and Black Card price testing. In addition, Planet Fitness reported a 4.3% increase in same-club sales and a 10% rise in adjusted EBITDA for the third quarter. The company's revenue grew by 5.3%, reaching $292.2 million, and ended the quarter with approximately 19.6 million members.
The company also raised the classic membership price to $15 for new members and reached nearly 3 million students through the High School Summer Pass program. Planet Fitness has set a target of 5,000 clubs in the U.S., with plans of expanding into international markets. According to BMO Capital, Planet Fitness's underlying business strength is expected to continue driving its value forward, making it an attractive investment. The company anticipates a revenue growth of 8% to 9% for 2024, with same-club sales growth expectations tightened to 4% to 5%.
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