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Why Planet Fitness Stock Popped Today

By Jeremy Bowman - Mar 10, 2020 at 5:04PM

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Shares of the discount gym chain gained with the broader market recovery today.

What happened

Shares of Planet Fitness (PLNT 1.88%) were getting pumped up today, one of several stocks to make big gains on hopes for a stimulus package from the federal government. A recent round of insider buying might also have encouraged investors.

The stock finished the day up 10.7%, while the S&P 500 chalked up a 4.9% gain.

A Planet Fitness trainer smiles at a woman who is working out.

Image source: Planet Fitness.

So what

Prior to today's gains, shares of Planet Fitness had fallen by more than a third during the coronavirus sell-off, a period that also included underwhelming guidance in the company's fourth-quarter earnings report. Investors seem to believe that if the coronavirus outbreak gets worse, gym-goers might prefer to work out at home in order to avoid crowded spaces.

Today, the stock rebounded after President Trump pushed for a number of stimulus measures, including a payroll tax cut, in meetings with lawmakers this afternoon. Stocks rose broadly in afternoon trading.

Separately, CFO Dorvin Lively bought 15,000 Planet Fitness shares for $908,000 last Friday, and the day before, CEO Chris Rondeau bought 20,000 shares of company stock. Insider buying is generally a signal that those who know the company best think the stock is going to go up, and it often helps build investor confidence. After the market sell-off yesterday, investors could be responding to those insider buys today.

Now what

Investors have been skeptical of Planet Fitness since the coronavirus scare began, but the discount gym chain is not as vulnerable as it might seem. Most of its locations are franchised, limiting the company's direct exposure to the individual performance of the gyms. Planet Fitness is also a membership-based business, and members are unlikely to cancel their memberships even if fear of an outbreak keeps them away from the gym for a month or two. Though the outbreak could put a dent in new sign-ups and visits, it seems unlikely to threaten Planet Fitness significantly and shouldn't be a long-term concern.

For 2020, the company is targeting same-store sales growth of 8% and expects adjusted earnings per share to increase 16%, indicating management did not expect a coronavirus-related headwind as of two weeks ago.

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