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Why Planet Fitness Stock Jumped 23.9% in April

By Keith Noonan – May 5, 2020 at 8:40AM

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The gym chain's stock has fallen roughly 23% in 2020, while the S&P 500 index is down roughly 12% across the same stretch.

What happened

Shares of Planet Fitness (PLNT -0.08%) climbed 23.9% in April, according to data from S&P Global Market Intelligence. The gym company's stock bounced back after falling 27.8% in March. 

^SPX Chart

^SPX data by YCharts

Sell-offs stemming from the coronavirus pandemic disrupted the market in March, and Planet Fitness' valuation sagged as the business closed its corporate-run gyms and franchise operations. The stock recovered in April in conjunction with momentum for the broader market and got a boost from the emergence of government plans to move the economy toward more normal operating conditions. 

The inside of a Planet Fitness gym.

Image source: Planet Fitness.

So what

The Trump administration released guidelines on April 17 for the first stage of reopening the economy, and the criteria seemed to pave the way for gyms to reopen in some states. With most of its locations still closed, Planet Fitness has seen its ability to bring new members on board diminished, and performance may be relatively sluggish even after business restrictions are eased. The company's membership-based business and bargain-focused model means that it may have managed to retain a large portion of its customer base despite headwinds created by the coronavirus, but the unprecedented conditions have presented new obstacles to growth. 

Now what

Planet Fitness stock has slipped early in May amid a sell-off within the broader market. The company's stock has dipped 4.8% in the month's trading so far.

^SPX Chart

^SPX data by YCharts

Planet Fitness is scheduled to report first-quarter results and host a conference call after the market closes on May 5. The company didn't give specific first-quarter sales or earnings guidance when it reported fourth-quarter results in March, but it did lay out targets for full-year performance.

The company's most recent guidance projected annual revenue to increase roughly 12%, same-store sales to rise 8%, and non-GAAP (adjusted) net income to climb roughly 10%. With the coronavirus crisis still disrupting many aspects of daily life in the U.S., there's a good chance management will alter its full-year outlook along with the company's first-quarter report.

Planet Fitness is valued at roughly 60 times the average analyst target for this year's earnings and roughly 8.6 times the average sales target. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Planet Fitness. The Motley Fool has a disclosure policy.

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