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Why Planet Fitness Stock Gave Up 16% Last Month

By Jeremy Bowman - Mar 6, 2020 at 2:40PM

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Shares of the discount gym operator slipped on coronavirus fears and on weak guidance in its earnings report.

What happened

Shares of Planet Fitness (PLNT 1.88%) were looking fatigued last month as the discount gym chain got swept up in the coronavirus sell-off and posted an earnings report that included disappointing guidance. As a result, the stock fell 16%, according to data from S&P Global Market Intelligence.

As you can see from the chart below, the decline came at the end of the month, when stock crashed on coronavirus news and the company turned in its earnings report.

PLNT Chart

PLNT data by YCharts.

So what

Planet Fitness stock fell 6.7% on Feb. 26 after the company's fourth-quarter earnings report came out. The company delivered a solid quarter as same-store sales rose 8.6%, driving overall revenue up 9.8% to $191.5 million, which beat estimates at $190 million. Revenue growth was modest due to a forecast decline in equipment sales.

A trainer and client at a Planet Fitness gym.

Image source: Planet Fitness.

On the bottom line, adjusted earnings per share increased from $0.34 to $0.44, which topped expectations at $0.41.

For the year ahead, management expects revenue to increase just 12%, down from 20% growth in 2019 (as replacement equipment sales are expected to be down in the first quarter), and called for 16% growth in adjusted EPS. Both of those numbers were below estimates.

Now what

Planet Fitness shares have also been getting banged up by fears about the coronavirus because some investors think the risk of getting the virus could cause people to stay away from the gym. Peloton, the maker of in-home interactive exercise bikes, found favor among investors at one point as an alternative for gym rats, but the risks to Planet Fitness from the coronavirus might not be as great as they seem. The company franchises most of its locations, limiting its exposure to the performance of the individual gyms. And since it's a subscription business, members are unlikely to cancel even if they don't want to go to the gym for a few weeks or months during the coronavirus scare.

In other words, if this growth stock continues to fall, it could become an appealing buy.

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Stocks Mentioned

Planet Fitness, Inc. Stock Quote
Planet Fitness, Inc.
$69.29 (1.88%) $1.28
Peloton Interactive, Inc. Stock Quote
Peloton Interactive, Inc.
$9.13 (-0.55%) $0.05

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