Final Trade Detail

Planet Fitness

Investors who followed this trade Generated a

-21.87% Return

Open Date

06/07/19

Close Date

09/18/19

Hold Time

104 Days

Buy Price

78.91

Close Price

61.65

%Gain/Loss

-21.87%

Original Recommendation

Planet Fitness

Planet Fitness (NYSE)

our opinion

buy

current price

$78.91

target price

$100

market cap

$7.3B

div yield

0%

  • Planet Fitness opened up a record number of stores in the first quarter. And plans to open up 225 locations this year alone.
  • It's long term goal is 4,000 stores over the next couple years - providing us a huge runway of growth left.
  • Planet Fitness is gobbling up cheap retail space left by the "death of retail." It is now the anchor tenant that retail stores want to be next to. Not Nordstrom, Macy's, or Kohl's anymore.

trade details

It’s no surprise the world is moving towards a healthier lifestyle.

New diets are on the rise again. Keto, Paleo, Vegan are just a few that come to mind.

But that’s only part of getting healthier. Physical fitness is another.

Some Americans are committed to working out every day. But most Americans just simply aren’t. Fitness is something they know they need to do. But they can’t get themselves to commit day in and day out. This means they’ll pay up for a gym membership. But not a too expensive one because they’ll just cancel.

That’s why Planet Fitness (NYSE: PLNT) is our next recommendation.

It’s the most affordable gym in America – at just $10/month. It’s an absolute steal for everyday gym goers. And too cheap a price to cancel for casual gym-goers.

The casual gym goers won’t cancel… because going just twice a month makes the membership worth it. And for those that never go, it’s $10/mo for the “dream of getting back in shape.”

Planet Fitness now has over 13.6 million members across 1,806 stores. It opened a record 65 stores in the first quarter of this year – an all time record.

Same-stores-sales (SSS) grew 11% and earnings-per-share (EPS) grew almost 30% year-over-year.

Most people wouldn’t know but PLNT has been an absolute beast of a growth stock – up over 550% since 2016.

But the ride up isn’t over yet.

PLNT plans to open a total of 225 locations this year alone. And over 4,000 long term – a long runway from here.

The Best Business Model

Planet Fitness is all franchisee owned – which means it licenses out its name to franchisees, but doesn’t own any of the overhead.

It’s one of the best business models because it significantly reduces its cost. And puts the burden of operating profitably on the franchisee. Meanwhile it just collects its royalties.

We know this model works.

Just take McDonalds (MCD) for example.

It’s stock went nowhere from 2012-2016. It’s market share of the fast food industry dropped from 17.4% to 15.4% over that four year span. Same-store-sales were stagnating… and even dipped a bit.

Investors were getting restless until Steve Easterbrook took over as CEO in 2016.

His goal was to sell off all the McDonalds owned stores. And convert the entire business to at least 95% franchisee operated.

Easterbrook has done an incredible job turning MCD around. MCD’s is up over 100% since Easterbrook took over.

Planet Fitness isn’t dealing with any of that.

It’s just a straight franchise/franchisee model. And it’s crushing because of it.

Buying Planet Fitness

Value analysts wouldn’t touch this stock looking at its P/E ratio.

But we’re buying Planet Fitness because it’s a growth and momentum company. Not a value company.

We know it’s opening hundreds of stores this year. And plans to more than double its store count over the next couple years.

It’s growth numbers are extraordinary. And we’re going to take advantage.

PLNT is justa chip shot away from its all-time highs. Once it breaks that, it’s off to the races.

We’ll set an initial price target of $100. But we plan to hold this for years (assuming we don’t get stopped out).

Buy Planet Fitness up to $84. We’re going to place a volatility based trailing stop on this position. And will alert you via email if we stop out.

**As always, please exercise proper position sizing. DO NOT put more than 3-4% of your portfolio into this name. (Meaning don’t invest more than $4,000 if you have a $100,000 portfolio).