What happened
Shares of Planet Fitness (PLNT +1.28%) were down 14% in August, according to data provided by S&P Global Market Intelligence. The company reported financial results that fell short of expectations. The market also performed poorly during the month, dropping 4% and dragging Planet Fitness down with it.
So what
On August 9, Planet Fitness reported financial results for the second quarter of 2022. The company reported record results in some regards -- record locations, record membership, and record quarterly revenue. However, its Q2 revenue of $224.4 million was a few million short of Wall Street's estimates, causing the stock to slip following its quarterly report.
NYSE: PLNT
Key Data Points
Q2 revenue for Planet Fitness was up 63.5% year over year, and management thinks full-year revenue will be up in the mid-50-percent range compared to 2021 revenue. However, Morgan Stanley analyst Brian Harbour believes it will be hard for the company's results to exceed management's guidance. This is why he lowered his price target for Planet Fitness stock to $93 per share, according to The Fly.
Harbour wasn't the only prominent analyst decreasing their price target for this company's stock following its Q2 report. Cowen analyst Max Rakhlenko did the same, dropping his from $110 per share to $95 per share. These comments from Harbour and Rakhlenko likely also contributed to Planet Fitness's underperformance in August.
A sharp drop for Planet Fitness stock also occurred near the end of the month, but it's unclear what caused it. During the final five trading days of the month, it was down nearly 13% compared to the market's decline of just 6%.
The timing of the drop coincides with the resignation of Shane McGuiness from Planet Fitness. McGuiness was the co-founder and CEO of Sunshine Fitness, a Planet Fitness franchisee that was acquired by the company earlier this year. In the acquisition, McGuiness had stayed with Planet Fitness, taking on the president role for company-owned gym locations. However, he's now left the company.
The announcement of McGuiness's resignation did happen at the same time as the sharp drop in Planet Fitness stock at the end of August. However, in my opinion, this is probably just a coincidence. The company has a long track record of success at company-owned locations, and it's unlikely that McGuiness's departure would negatively impact that.
Now what
With the acquisition of Sunshine Fitness, approximately 10% of Planet Fitness locations are now company owned, which is management's goal. This acquisition is one of the primary reasons the company is hitting record quarterly revenue right now. Previously, it was simply collecting franchise fees from these locations. Now it's all revenue.
This is noteworthy because while membership is at a record high of 16.5 million, the number of members per location is actually still down. This provides an upside opportunity. Management expects double-digit same-store-sales growth this year, which could lead to operating leverage and higher profits in the second half of the year considering it has a higher number of company-owned locations compared to times past.
August might have been a poor month for Planet Fitness stock, but the business still shows a lot of stamina.
