What happened
Shares of exercise gym chain Planet Fitness (PLNT 1.01%) plummeted on Thursday following the release of its latest quarterly financial results. As of 12:30 p.m. ET, Planet Fitness stock was down 15% and is now down about 28% from its all-time high, which is a rare decline for this company.
So what
Today, Planet Fitness reported financial results for the first quarter of 2023. In Q1, the company generated revenue of $222 million, a 19% year-over-year increase. This strong top-line growth was driven by growth in gym memberships. It ended Q1 with 18.1 million members, up a whopping 1.1 million members since the end of the previous quarter.
Despite the strong Q1 growth, Planet Fitness' revenue fell short of Wall Street's expectations. And it fell short of expectations on the bottom line as well. Analysts had hoped the company would have adjusted earnings of $0.46 per share. Instead, the company had adjusted earnings per share (EPS) of $0.41.
According to generally accepted accounting principles (GAAP), Planet Fitness had EPS of $0.27, a 42% year-over-year jump. But it appears this improvement wasn't enough to satisfy the market today.
Now what
In my opinion, the crucial context with Planet Fitness is that management didn't give Q1 financial guidance but rather guidance for the entire year. Q1 results may have underperformed external expectations, but it doesn't appear to have caught management off-guard. To the contrary, management reiterated every facet of its full-year guidance for 2023, suggesting that Q1 results were exactly what it expected.
I'd say Planet Fitness' business is performing just fine, and it's growing on schedule. That said, I could understand if someone believed it was an expensive stock. With today's results and the subsequent drop in stock price, Planet Fitness stock trades at about 55 times trailing earnings, which is pretty pricey for a company only expecting between 13% and 14% top-line growth this year.
